Programmatic in-(da)-house?

This article was previously published on my own blog on May 8th 2019.

It’s been well reported that due to intense competition from Facebook, Google and now Amazon, advertising technology providers are being forced to focus on a core piece of technology within the advertising value chain. Whilst the big 3 can operate businesses that touch both the demand side and the supply side, most businesses operating in the advertising space today, whether it be desktop or mobile are being forced to pick a side and focus. In this post I’m going to hone in on mobile performance advertising ad tech and briefly on its related supply equivalent but most of the examples here relate to the brand business and desktop.

As GAF (Google, Amazon and Facebook) leverage their huge data sets to increase performance of mobile performance campaigns they’re putting increasing pressure on their competitors to change the way they do business. I’d argue you can bucket the way that those businesses are being asked to change by advertisers and publishers into three core underlying principles: Control, Transparency and Performance.

I’ve worked closely with both Supply and Demand side partners, and from my experience, the core motivation driving the decision of which Supply side partners most publishers work with are heavily weighted in favour of “Performance”. Publishers will take a higher performing (read CPM/fill rate) in lieu of good Control and a high level of Transparency. As long as inappropriate or competitive ads aren’t being served to their audience they’ll take the pay check. However — there has been a trend over the past couple of years for SSP’s to add value eg. user level ad data, creative controls, price floors, PMP’s, but ultimately money talks.

On the Demand Side the same requirements exist — Control, Transparency and Performance. Performance has been the key pillar driving the industry forward for the last 10 years. eMarketer has Facebook and Google at a 59% share of digital advertising spend (with Amazon increasing it’s share), but anecdotal feedback from many mobile gaming UA buyers is that the share of wallet that FB / Google take of the monthly acquisition budget is up to 80%.

Facebook and Google have login data from huge numbers of users on their platform to leverage to target ads — their ability to drive performance by serving the right ad to the right user at the right time is phenomenal. This is validated when looking at the Appsflyer Performance Index — it’s clear that when you look at ROI in both gaming and non-gaming, FB & GOOG are dominant.

Gaming:

Non-Gaming

However — if the lifeblood of your company is based on a reliable stream of new users to your app property, is such concentration and reliance of advertising spend on two partners a sustainable position to keep? Asking yourself this question is validated if you take the time to dig into how the mechanics of how the partnership works with these two behemoths. As well as having significant benefits (performance and scale) these “walled gardens” do come with limitations for both Supply and Demand partners. For the rest of the post I’ll dig in on the Demand side of mobile as I think that’s where the most innovation is going to happen in the Ad-tech space over the next couple of years.

Control and Transparency

Clearly the “Performance” element of “Performance Marketing is king. However if we look at a marketers ability to truly Control their advertising spend, most ad platforms today fall short, especially in their ability to empower advertisers to choose the price they pay for each individual user, easily blacklist / whitelist specific publishers, create and manage campaigns and test new creative.

At the same time there are opportunistic areas that advertisers want to explore. Buyers leverage the algorithms, targeting methodology of the ad platforms they work with but these are all generalized technologies based on aggregated data in part sent by the advertiser for the greater good. The question for an Advertiser at some point may become, “what if I don’t share my data with my competitors and invest in this myself”.

If an Advertiser is large enough this can become a viable question to spend time to research. Ultimately this research is going to lead an Advertiser (as it led me) to the programmatic space. The nature of the OPENRTB spec means that an Advertiser gets significant visibility into where their ads are placed, to whom and the price they pay to do that and so the goal to “in-house spend” using programmatic channels becomes a truly interesting one.

If we look at what this means from a “Control” point of view if you in-house your programmatic spend you own:

• IP on “how your UA is done”
• Data — limiting who you share your data with means it’s less likely to be leveraged by your competitors
• Algorithm and the feedback loop into how its developed
• Creative testing framework
• Creative rotation (taking down / putting up)

Taking this strategic decision then opens up a bunch of really interesting areas on the transparency side that can help you think differently about how you do your UA:

• Attribution — standardization of how attribution is done vs relying on the ad platforms
• Incrementality — access to clean testing environments
• Fraud — full access to the bundle ID’s for quick blacklisting/whitelisting
• App usage — build your own session graph
• Supply Source visibilty (Publishers & Exchanges)
• Supply path optimization — cut out the middleman

What next?

Having worked at Unity (a tools / centralised technology company) I find it really interesting when content creators and direct consumer businesses build their own ad tech but increasingly it’s becoming clear to me that unless the incentives are aligned between the buyer and the seller there will always be an opportunity for the seller to take advantage. This will lead to advertisers spending more time understanding if in-housing their programmatic spend might work for them.