craig macdonald
TRANSCRIPT
March 23, 2015
Scottsdale, AZ
The Economics of In-Sourcing
Programmatic Ad Buying
Copyright © 2015 Accenture. All rights reserved. 2
Programmatic Big Picture…
Programmatic Ad Buying Expense is High
• Agencies provide service, however expenses remain high
• In-sourcing becoming a viable option
• Particularly common for the largest global marketers
The business case is there, but…
• There are unknowns
• Executional risk
• Organizational know-how
• Technical implementation
• Analytical discipline
In-housing CAN be successful with focus on basic principles
• Staffing: Know who you have and who you need
• Technology: Picking the right partners from the crowd
• Focus: Business objectives over technology objectives
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Marketers are moving programmatic buying in-house, enabling a seamless
connection between their data, owned and paid media.
Advertiser
Agency
Trading
Desk
Demand-
Side
Platform
(DSP)
Sell-Side
Platform
(SSP)
Publisher
Broadcaster
Ad Networks
Ad Exchanges
Demand Aggregation / Intermediate Supply
Media Sales
House
Advertiser
Demand-
Side
Platform
(DSP)
Ad Networks
Ad Exchanges
Sell-Side
Platform
(SSP)
Publisher
Broadcaster
Media Sales
House
What’s Changing in the Advertising Ecosystem?
Who’s doing it?
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Value Levers
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Apart From Pure Cost Savings, Data, Process & Quality
Control Matter
In-sourcing means media decisions are
objective and based on what’s best for
the marketer
In-sourcing brings assurance that
marketer’s first-party data remains the
marketer’s exclusive property
In-sourcing means internal teams can be
accountable to standards and policies
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The Business Case
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Cost of the Status Quo For a Major Advertiser
(hypothetical)
As Programmatic spending increases and moves into offline media, agency/desk
fees escalate
$54,450,000
in
agency/desk
fees over
five years for
a major
advertiser
Agency/Desk
Fees
$3,000,000
(30%)
6,300,000
(30%)
$9,900,000
(30%)
$17,250,000
(30%)
$18,000,000
(30%)
Media
Budget
$200,000,000
$210,000,000
$220,000,000
$230,000,000
$240,000,000
Programmatic
Budget
$10,000,000
(5%)
$21,000,000
(10%)
$33,000,000
(15%)
$57,500,000
(25%)
$60,000,000
(25%)
2015
2016
2018
2017
2018
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So What Does the Alternative Cost?
18-month start-up investment requires ~$3-5M, while 5-year requirements total
~$12M of operating expense and ~$10M in capital expense.
Start-Up Investments
Year 1-2 (18 months)
• Total: $3-5M
• CapEx: $2-3M
• OpEx: $1-2M
Investment Focus
• Strategy Development
• Set-Up and Deployment
• Initial Operationalization
• DMP, DSP and Integrations
Ongoing Investments
Year 3-5
• Total: $15-17M
• CapEx: $6-7M
• OpEx: $9-10M
Investment Focus
• Ramp Up of Operationalization,
including analytics, trading and
optimization, ad operations,
finance and publisher relations
• Continued Expansion of Platform
& Data
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Savings Potential From In-Housing
An in-sourced trading desk can deliver ~$55 million in fees avoided over five
years, which delivers incremental free cash flow ~$31 million.
$0 $3 $4$11 $12
$0 $3 $7
$19
$31
$0
$100
2015 2016 2017 2018 2019
YearlySavings
Cumulative
Savings over time (in millions)
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Making It Happen
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AD
OPERATIONS
TRADING &
OPTIMIZATION
ANALYTICSPARTNER DEV
& FINANCE
• Creation and
maintenance of
inventory, platform
and tech
partnerships
• Financial and
billing capabilities
to compensate
partners
• Trafficking ad
creative across
media channels
• Campaign setup
• Campaign
maintenance
• Campaign
execution team
• Day-to-day
optimization
• Responsible for
delivery and
performance
metrics
• Standard
performance
reporting
• Detailed audience
analytics
• Performance
modeling
In-sourcing Requires New Skills & Knowledge
New Capabilities Required
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In-sourcing Means Partnership Evaluation, Strategic
Building and Operations
Considerations Vary Based on Definition of
“In-Sourcing”
Vision and Build
• For marketers looking to set up their own Programmatic platform and operate it with internal staff:
• Need to define strategy and operating model the set up the technology, the organization and rules.
Operate and Optimize
• For marketers looking to bring efficiency, scale, faster time to market and optimization to an existing platform:
• Need operating services for analytics, process management and ad operations as well as financial and campaign management.
End-to-End Support
• For a marketer seeking the efficiency of a single partner:
• Both of the above
Elements of In-sourcing
Bidding
Strategy
Strategy and Build
Operating
Organization
Design
Partner
Selection &
Platform
BuildData
organization
and
actionability
Desk OperationsAnalytics &
Optimization
Process
Management
Campaign
Management
Ad
Operations
Financial
Management
Industrializing
Results &
Findings
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Basic Programmatic Buying
Infrastructure
Advertiser
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Next?
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The Future
Expect operational costs to come down
Expect consolidation of technology
Expect stasis in in-source/agency
conversation
Expect staffing issues to improve
Copyright © 2015 Accenture. All rights reserved. 16
Contact
Craig Macdonald
Accenture Interactive
Los Angeles, CA
+1.858.735.6225
Kevin Rettig
Accenture Interactive
New York, NY
+1.917.452.3527