"Data Driven Thinking" is written by members of the media community and contains fresh ideas on the digital revolution in media.
Today’s column is written by Marc Grabowski, chief operating officer at Nanigans.
Ever since the first DSPs hung their shingles, the flood of venture-capital dollars into the Software-as-a-Service space has forced senior executives to ask themselves one very important question:
Should they outsource programmatic buying or come up with a solution in-house?
For many firms, the answer is in-house expertise, also known as self-service. Cost savings, data protection and creating expertise that is core to your brand are some of its potential benefits. I’m not going to get into whether companies should build or license technology, although that is a key decision that needs to be made. Instead I’ll focus on the pros and cons of bringing programmatic buying in-house and the best practices for the transition.
I recommend first choosing a SaaS before determining who should manage the platform. Don’t start with a professional-services company and then use their default software, because it won’t matter how proficient they are at managing your campaign if they don’t have the right tools to provide the transparency, performance and insights you need.
Once you’ve chosen a platform, you may consider the managed-service route, which would involve the SaaS partner directly or a separate professional-services entity with which they have an agreement. Most SaaS companies with scalable software have lists of trusted partners that excel in professional services and have received detailed training on the SaaS platform. Your decision may hinge on additional services that may be provided or a determination that they are “expert enough” to properly leverage the SaaS platform.
The benefits of taking the expertise in-house are many:
• Create Expertise Core To Your Brand
Many direct-response brands have crafted operational efficiency around optimization tactics so unique that the rest of the industry can’t keep up. Many DR companies have successfully created rigorous optimization and would rather invest in training and onboarding resources than in building technology.
Acquiring these skills can help attract talent to a brand as much as the core products themselves. Consider this the next time you come across a resume from a candidate who spent time in the user-acquisition department at a company like Zynga, Netflix or Fab. Be sure to consider the functionality you’d like to add to your core business expertise, such as ad scheduling, creative execution, audience targeting and performance analytics. This will inform your recruiting and hiring processes.
• Protecting Data
Bringing programmatic buying in-house can protect your data. Some companies severely limit access to their data, even to third-party professional-service groups and the servers of SaaS companies. I know of a major brand that requires the engineering teams of SaaS partners to set up completely unique instances so nobody within the partner SaaS company can see data flowing through this incident on their platform. Expect the trend to decline as companies gain comfort in managing data protection contractually.
The drawback to closing off data from a SaaS provider is that it can lead to challenges in technical support and training. Be sure to discuss such an execution in detail and review specific support protocols during the scoping phase.
• Cost Savings
A self-service option often costs a fraction of the managed services. When looking at a price comparison, it is important to contrast the cost savings around the anticipated volume that will run through the partner over a 12-month period.
If a marketer is running $100,000 per month and the SaaS provider charges 5% less for self-service compared to managed, for example, the advertiser will save $5,000 per month by choosing self-service. That’s $60,000 in savings per year, which may be enough to hire and train an optimization team lead.
Starting a team of optimization analysts, however, is difficult and you may not have the experience to hire the right type of talent. Training and ongoing education for such a resource can also cause similar challenges if you don’t already own the core expertise.
• Speed To Market
Most SaaS companies have Service Level Agreements guaranteeing turnaround times for creative, optimization and reporting. Your business, however, may move faster than some SLAs cover.
Owning the resources may provide greater flexibility with challenging deadlines. Internal resources can also better predict the time it takes to manage your campaigns. You may be able to use a portion of the resource’s time for different projects. You may also need to increase the number of resources on the project but can determine the seniority and core skillsets needed in that next hire. Keep in mind that it will take time for your resource to be as efficient as one who works for the SaaS company.
• Consistency Of Account Teams
If you outsource management of your tech buying, you may find that the account teams from your partner company are constantly shifting. Normally the senior contact is a constant but the tactical account teams may be pulled into other projects or asked to split their time between your campaigns and those of other sophisticated advertisers.
Attrition happens. If you outsource platform management, you must trust the retention strategy of another company with resources pivotal to your marketing success. Depending on your ability to attract and retain talent, it may be preferable to keep these resources in-house. However, if your resource lives as a team of one, they may not have proper mentoring to learn at the market’s pace and could end up as a retention risk.
Making The Transition
Moving from managed to self-service depends on your in-house resources and the core strength you want to build. If your resources are creative in nature, determine how they can take over this element of the campaign. They may also be able to monitor campaign performance but may not be able to run any detailed analytics to drive optimization.
If your resources have strong analytical skills, are experts in Excel or can create, modify and query in SQL, they may be better candidates to oversee campaign optimization, depending on flexibility of your chosen SaaS platform.
It is best to work with your managed-service partner or SaaS platform before launch and to clearly outline the transition process. This is especially important if your goal for independence doesn’t mesh with your partner’s goal of you relying on their services for an eternity.
The fact is this industry suffers no shortage of SaaS platforms nor managed-service providers. The challenge is selecting the right partners who can go to market with you for your specific needs.
For marketers who have undergone this evaluation, why did you choose self-service or managed? What other considerations arose? Which dependencies came up in the process? What happened when you tried to bring the expertise in-house?