Marketing Moneyball - Facebook Marketing Partners

May 2014

MARKETING MONEYBALL WHY IN-HOUSE ADVERTISING CHANGES EVERYTHING

Advertising Automation Software

Marketing Moneyball: Why In-House Advertising Changes Everything

The Internet hasn’t just changed the way people interact with one another socially; it’s changed the entire foundation of how businesses reach consumers. With the rise of lightweight web-based interfaces and marketing automation platforms for everything from outbound email marketing to inbound content marketing, today’s businesses are empowered to take control of their digital marketing in-house—and this includes taking media buying into their own hands.

Programmatic technology revolutionized Wall Street by automating trading and removing middlemen, and digital advertising is following suit. Companies are increasingly taking their media buying from external third parties to in-house talent. When armed with best-in-class ad automation software, an individual inhouse advertiser can achieve the scale, efficiencies, and performance at or beyond what’s possible through third-party teams. CEOs and CMOs are increasingly recognizing that online customer acquisition and remarketing are key to

business success, and user-friendly tools have enabled them to develop in-house competencies around:  Campaign conception  Execution  Measurement  Optimization

Partha Iyengar Vice President Gartner

The normal pace at which businesses develop and plot out learning and assignments will not suffice. Speed, nimbleness, and imagination are crucial.

Nanigans | Advertising Automation Software

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In this eBook we discuss the growing trend of in-house advertising, why marketing teams are taking their advertising in-house, and who’s best fit to adopt this model. What’s Inside?  Data that supports the growing adoption of in-house advertising  Benefits of in-house marketing in terms of cost, control, expertise, speed, and transparency  A teaser to our next eBook

LET’S GET STARTED What is in-house advertising?


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CHAPTER 1: What is in-house advertising?

Since the first banner ad was served in 1994, marketers have been under pressure to prove value through data—otherwise known as return on ad spend. Today, advertisers who have historically been focused on broadcast and generating brand awareness are expected to report with hard data that they not only reached their specific target audience, but they were able to effectively encourage that audience to take action. With the proliferation and ubiquity of so many digital channels comes the impulse to put them under one in-house umbrella— allowing companies to keep marketing campaigns coordinated, aligned with business objectives, and cost effectively generating revenue through the online marketing funnel.

2014 US Digital Ad Spending Share, by Objective Source: eMarketer’s Ad Spending Report Series, May 2014

Branding

40.9%


Direct Response

59.1%

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A September 2013 study by the Association of National Advertisers (ANA) shows that the decision by companies to take their media buying in-house is becoming more and more prevalent:

58%

56%

52%

of marketers currently utilize in-house teams, a 16% increase from 2008

of marketers have moved established business from an agency to in-house

of marketers are assigning digital, social and mobile functions in-house

Digital ad budgets are also beginning to reflect the impact of automated, data-driven software in the marketplace, according to AdExchanger’s recently released State of Programmatic Media Report. Based on a survey of more than 400 marketers, ad agencies and publishers:

2/3 Almost two-thirds of marketers plan to double their programmatic ad spend over the next 12 months

1/4 One-fourth of marketers plan to spend at least 80% of their budgets programmatically


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You may think that large-scale in-house media buying means assembling a marketing army, but the beauty of automation is that it leads to massive time savings and efficiencies—allowing one or two people to make an impact that would have easily taken three to ten times the manpower a couple years ago. A savvy new generation of marketers has developed data-driven skills alongside selfserve tools, possessing a killer combination of creative and analytical instincts. In the hands of in-house marketing professionals, automation software is the key to delivering the right message, at the right time, to the right people.

UP NEXT Other key reasons why this approach to advertising is taking off


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CHAPTER 2: Why are companies taking advertising in-house?

Taking advertising in-house means freedom—the freedom to react quickly to market shifts, spend more time on strategy, and focus on the metrics that matter most.

$2 CO L 0 YO 0 S LEC U AL T PA AR SS Y G O

Cost Savings: Pay for ads, not middlemen.

A

S

In-house advertising coupled with direct to publisher media buying is the equivalent of passing go AND collecting $200.

Even a back-of-the-envelope cost-benefit analysis of taking advertising from an external third party to an inhouse team is a compelling one. As you can see from the example below, a company spending $2,000,000 annually on digital advertising can save $500,000 by taking their advertising in-house. Through a 3rd Party Annual digital advertising budget Average managed services premium of third party (30% of spend) Annual software subscription Annual budget for actual ad placements

Using Software In-House

$2,000,000

$2,000,000

$600,000

$0

$0

$100,000

$1,400,000

$1,900,000

This not only unlocks $500,000 in additional budget to be channeled to actual ad buys instead of intermediaries, but it also means that you have more budget to bid higher to win auctions and place your message in front of high value audiences who typically cost more to reach.


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Even if an additional in-house resource is needed for a company to manage the advertising software in-house, at an estimated $100,000 in annual salary you still have $400,000 in cost savings (and it is worth noting that even leveraging a third party for managed services requires a dedicated internal resource to manage that relationship, coordination and communication).

40% average media markup charged by third-party intermediaries

Similarly, if you are leveraging an ad network, agency trading desk, or other black box vendor as opposed to platforms that enable direct to publisher media buying, a substantial portion of your budget is going to media markup costs. Media markup costs are the profit margins that advertising intermediaries take by charging a premium on top of the cost of the inventory as they resell that inventory back to the end advertiser. According to Boston Consulting Group research, these media markup margins average 40% and can be as extreme as 100% depending on the ad network and vendor.

Control: Retain ownership over performance. The most successful companies today understand the value of gathering data for business intelligence. Rather than shy away from the responsibility of campaign performance, in-house advertisers want to dive into the data to own and improve the outcomes. These advertisers thrive on the ability to pinpoint new opportunities and valuable customer learnings from campaigns to improve the performance of future ad campaigns as well as other marketing initiatives. In-house advertisers benefit from having total control over how their products are marketed, from ad design and testing to how campaigns are optimized and reported. When in-house teams assume responsibility for everything from creative and budget allocation to monitoring performance and making optimization adjustments, they gain real-time visibility into powerful customer insights. Marketing teams that control digital advertising in-house across a variety of media channels further benefit from cross-channel learnings and performance gains. Rather than keeping digital ad budgets siloed with various third parties, these in-house advertisers can glean insights from one media channel and apply


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them to another. Mobile is a great example of this as these devices continue their trajectory toward becoming the first screen. Feeding purchase behavior learnings from your mobile campaigns into your desktop campaigns can bring new levels of relevancy to your audience that wouldn’t otherwise be possible if desktop and mobile budgets were siloed among different external agencies or vendors. Expertise: Make the most of your in-house knowledge. No one understands a company’s customers, products, and industry better than the internal marketing team that lives and breathes these every day through routine touch points like phone calls, emails, meetings and conferences. Inhouse advertisers can leverage industry expertise to maximize the effectiveness and scale of their campaigns. They also have the benefit of deep product and customer knowledge to run high-performing campaigns like no third party ever could. An IBM C-suite study reveals that 94% of CMOs expect to accelerate the introduction of advanced (predictive) analytics and mobile applications into their business in the next 3-5 years, creating an immense opportunity for in-house marketers to apply industry-specific insights to data and customer behavior. For companies pursuing an IPO or increased valuation, “independent” and “dataoriented” are two very alluring descriptors for investors to latch onto. In-house expertise is a direct reflection of the power of your business. Speed: React quickly and autonomously. In-house advertisers are free to test and scale campaigns quickly, react to new market opportunities and pivot at will. Internal resources can achieve a level of reactivity that external parties cannot hope to match—a fact that is backed up by the ANA study: faster turnaround time was cited by 71% of respondents as an advantage of in-house. Let’s look at a real-life example. For eCommerce companies, sales over the holiday season represent a large amount of revenue—climbing nearly 10% according to eMarketer. Large-scale ad campaigns


71% of marketers cite faster turnaround time as an advantage of the in-house approach

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require a lot of monitoring and adjustment to ensure that supply matches demand. If a marketer runs a planned promotion over the weekend and inventory runs out, two things need to happen: (1) the campaign must be stopped; (2) the campaign must be rerouted to another sale. In the case of working with a third-party agency or vendor, it can take hours to get a response to a request for shutting down a campaign, and much more time spent back and forth with another third party to get new creative and redirect it to a different landing page. Whether it’s pumping up the volume on a successful campaign, launching new creative, hitting a seasonal window or reacting to something in the news, inhouse performance marketers have the competitive edge over third parties. Nancy Hill, President of 4A concurs: “It’s been very clear for quite some time that agencies need to be much more agile and faster to respond, and that’s what real-time marketing has pushed us all toward.” Transparency: Keep your digital media budget in plain sight. According to AudienceScience research, 40% of advertisers believe that a tool that provides transparency is ideal for better managing digital media spend. Yet marketing teams working with third-party agencies or black box vendors with media markup models rarely if ever Apple is driven not have insight into true media cost data, let alone any depth by a desire for more of additional performance efficiency, but one data. In-house advertising to keep intellectual software with direct-toproperty within its publisher media buying turns this model on its head by walls and retain more offering full transparency ownership over its into the true media cost creative work. and value their budgets are generating. Best-in-class ad automation software will further offer transparency into the decisioning logic behind Ann-Christine Diaz automated bidding algorithms. Advertising Age  September 9, 2013


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Adding depth to this transparency is the power of sharable reports and data visualization charts that make communications between marketing, sales and executive staff both possible and necessary. If bids are increasing during a campaign, marketing leaders in your organization will want justification. It’s much easier to quantify the value of digital media spend when the details are two clicks away. On the flip side, marketers are also increasingly interested in taking media buying in-house to ensure sensitive data is not made transparent to a third party. Marketers have voiced concerns particularly around sharing proprietary revenue data with external agencies and vendors for fear it will be leaked to competitors or used for the agency’s own gain. With regard to mobile in particular, Mike McGuire, VP of Research at Gartner for Marketing Leaders points out, “Who owns that data for a campaign, how it is maintained once the campaign is over—the issues around data ownership online are extremely difficult when we think about mobile.”

UP NEXT Bringing it all together


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CHAPTER 3: Conclusion

The widespread adoption of marketing automation software has been a gateway for in-house social and mobile advertising technology. Marketers who buy directly from publishers as opposed to through an agency or ad network benefit from:  Launching far more cost effective ad campaigns  Unmatched in-house knowledge of customers, products, and market environment  Ownership and transparency of their data Innovative companies that care about results and making the most of their data are building cross-functional in-house teams that take cues from customers across all touch points.

What organization isn’t interested in costefficiencies and speed to market, as long as it does not come at the expense of the quality of the work?

Bill Duggan Executive Vice President ANA Group


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In-house performance marketing teams can consist of one or more skilled operators focused on user acquisition and retention. These small teams are more agile and focused on the bottom line and success of the company than outside parties. Full-time staff are in tune with:  The company’s target market (customers)  Culture and core values  Aligning creative to branding and messaging style guides Pairing traditional performance metrics like CPC, CTR and CPA, user acquisition and retention numbers with social media and service monitoring tools across organizational siloes provides key decision makers with a 360 analytical snapshot of the customer landscape. This actionable data can be fed back into direct response and engagement campaigns to improve performance. According to Partha Iyengar, Vice President of Gartner, “As enterprises prepare for an increasingly digital world, CIOs must learn to tap into technology expertise across organizations and business domains.” Developing in-house advertising expertise is only going to become more important as competition for customer acquisition and remarketing talent heats up. Now is the time to take action.

Our next eBook will tackle the big questions around developing in-house advertising expertise:  Is in-house advertising right for your business?  What skills are important to hire for?  Where can you find or train qualified candidates?  How should you structure your team?


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Contributors

Juliana Casale Content Marketing Manager, Nanigans

Mike Lamy Marketing Associate, Nanigans

Cheryl Morris Director of Marketing, Nanigans

Nanigans empowers marketing teams to take control of their media buying in-house with best-in-class advertising automation software. A leading Facebook Strategic Preferred Marketing Developer (sPMD), Nanigans is chosen by the world’s leading ecommerce, gaming and other pure play internet businesses such as eBay, Vistaprint, Wayfair and Wooga.


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