Programmatic in-housing: challenges for advertisers and media agencies

In times of programmatic advertising, are media agencies becoming obsolete? Dr. Fabian Göbel from The Nunatak Group explains why it is too soon to say farewell to the intermediaries and how companies and agencies can adapt to the new options.

Dr. Fabian Göbel tells us about the new challenges that programmatic in-housing presents to companies and media agencies.
Dr. Fabian Göbel, Partner at The Nunatak Group, a business consultancy firm specialized in digital strategies (© The Nunatak Group).

How is programmatic advertising changing the media business?

Programmatic advertising is transforming the face of the media industry. According to a study published by the Interactive Advertising Bureau (IAB) in 2019, the fully automated trading of advertising space is already being used by nearly one in two advertisers (48 percent). In this context, it often makes sense to bring programmatic in-house: the study found that 89 percent of advertisers handle at least part of the process in-house. “As a result of the automation of the booking process and increasing AI capacities, which ensure that the media budget is used intelligently and efficiently, programmatic in-housing is likely to grow even further in the future,” predicts Dr. Fabian Göbel, Partner at The Nunatak Group, a business consultancy firm specialized in digital strategies. Companies hope that in-housing will speed up their processes and make them more efficient.

In light of all this, will media agencies soon no longer be needed as intermediaries? “Taking your media business into your own hands is not as easy as it may sound,” says Göbel. “This is because companies usually lack suitable data infrastructures and the necessary expertise.” According to Göbel, media agencies can provide support in this respect, but they need to transform themselves as well. He identifies the following main challenges when it comes to programmatic in-housing:

1. Programmatic advertising requires professional data management

“Switching long-established processes from being organized by agencies to now being managed single-handedly demands an extensive transformation,” stresses Göbel. Data management presents a particular challenge here: “Data management platforms pool together all touchpoints, merge offline data and CRM data, and allocate them to corresponding matching IDs. However, integrating all the data is tricky in practice at many companies because far too often, the data is stored decentralized, in a company’s individual departments,” he explains. “The prerequisites for effective data management platforms are complex – organizations must learn to make data available across silos, which in turn usually requires dedicated resources or profiles.” Due to these exacting requirements, data management remains one of the disciplines that advertisers prefer to outsource, according to Göbel.

2. A seamless interface connection is key to programmatic in-housing

“When advertisers move their programmatic buying in-house, the value chain only appears to become less complicated,” says Göbel. “The media agencies may have been removed as an intermediary, but a lot of additional service providers and platforms enter the picture. Especially when companies merge their data management platform directly with a demand-side platform, this results in numerous new interfaces.”

The problem: “In practice, however, it’s all too often a smooth connection that suffers, because the different technical systems frequently cannot be synchronized easily – but this makes data matching from various sources difficult,” explains Göbel. “Media agencies can leverage their experience here, as they usually have a perfectly functioning connection to the existing data sources and platforms.”

3. Programmatic in-housing requires sound internal expertise

From fee structures and consent management right through to ad verification, advertisers wanting to handle programmatic advertising in-house will find themselves suddenly confronted with an array of new issues. “Failure is inevitable if they do not possess the expert knowledge,” says Göbel. “Media agencies are still clearly in the lead in this respect. However, it is vital for advertisers to do their ‘homework’ and build up the relevant expertise in the short to medium term,” he recommends.

“Switching long-established processes from being organized by agencies to now being managed single-handedly demands an extensive transformation. That presents a wide range of challenges: along with building up expertise, these include managing campaigns across channels, for example. The latter ensures a meaningful interaction with other channels that cannot be bought programmatically yet and are therefore managed via media agencies.”

Dr. Fabian Göbel

4. In-housing programmatic advertising means adapting internal structures

Programmatic in-housing also has a significant impact on internal company structures: “Whether hybrid job profiles in agile teams or a central data hub within the company – programmatic in-housing changes internal structures, processes, and job descriptions,” says Göbel. “Since marketing, IT and HR are equally integrated in this, it is essential that departments work together smoothly. Furthermore, neither internal nor external training is sufficient to build up the necessary relevant expertise in the required level of detail over the short term, and there is a real shortage of skilled personnel on the employment market. This also currently still speaks in favor of media agencies.”

5. The costs and benefits have to be weighed all over again if programmatic in-housing is used

Programmatic in-housing does not automatically mean that processes can be carried out more cost-effectively than if a media agency were to be appointed: “New staff, new technologies, additional fees for demand-side platforms, brand safety tools, and the use of additional data: all these investments offset the costs saved in terms of external media buying,” Göbel points out. A detailed cost-benefit analysis should therefore be performed here. “It is also crucial to consider the extent to which in-housing will improve the quality of addressing users and help to better achieve or even exceed KPIs such as sales or brand awareness,” he adds.

Conclusion: the expertise of media agencies is still required if a company switches to programmatic in-housing

The complexity of programmatic in-housing processes is often underestimated. The biggest pitfalls lie in the coordination of data management, the smooth intertwining of different interfaces, and the changed requirements with regard to personnel. According to Dr. Fabian Göbel, agencies can therefore still play an important role in helping advertisers establish the right structures for data-driven marketing.

Göbel advises that “if media agencies want to continue to play their part, they need to adapt their service portfolio”. In the future, the main focus of media agencies will be on offering new consulting services such as training, creating programmatic data structures for clients, and appointing their own expert managers to act as project leaders and consultants: “We can see that a new type of service provider is emerging in this area, which is in high demand both internationally and nationwide in Germany – a hybrid of media agency and management consultancy firm,” reports Göbel. “If media agencies want to put the brakes on their own waning significance in this field, they have to transform themselves. Otherwise, they risk being completely overtaken by the new agile digital media data startups.”