‘In-housing’ is one of the buzzwords currently sitting near the top of the 2019 ad tech lexicon, in an interminable race with other terms such as ‘transparency’. But how should in-housing truly be defined, what role do agencies have to play in an in-housed world, and what can publishers do to take advantage of the change in the market?
To gain a sense of what the in-housing experience has been like for the sell-side, ExchangeWire speaks to Geoff Smith (pictured below), Director, Ad Tech and Innovation EMEA at eBay for his insight.
ExchangeWire: What are the main reasons for the recent trend of publishers in-housing their sell-side tech? What are the advantages, and how has your experience been at eBay?
Geoff Smith: In-housing needs to be properly defined. If in-housing means the disintermediation of partners in the value chain, then I would argue that only the largest of publishers have gone down the in-housing route. The time and resource investment needed to build an SSP, DSP or ad server is far beyond the reach of most sub-billion-dollar publishers, and even the billionaire club tries and fails on a regular basis to build or buy technology that can compete with the more established players.
If, however, in-housing means building technology that allows a publisher to take greater control of how its inventory is sold, then – with the widespread adoption of open-source header bidding solutions like Prebid – most publishers have been in-housing for some time.
Of course, this isn’t anything new, publishers have always been managing their inventory monetisation one way or another. The difference now is the way in which header bidding has removed many of the SSP’s USPs, causing considerable market pressure for them to differentiate. They are still very much needed though, as developing all the capabilities of a leading SSP takes serious commitment – and keeping pace is even harder.
At eBay, we have been on an accelerated ‘in-housing’ journey for some time, developing our own server-to-server header bidding solution that allows us to accommodate our own unique business case. For publishers like eBay whose core revenue stream isn’t advertising, a more bespoke solution is needed. Latency (or lack thereof) is paramount, as is understanding the value of a user to the core business, relative to the value of showing them an ad. Building a bespoke solution that delivers a truly unified and custom server-to-server auction logic has been key to managing revenue cannibalisation and unlocking incrementality through an optimised user experience.
What are the technical challenges for publishers to consider when in-housing?
Commitment and investment are not to be underestimated when developing more tech in-house. Ad tech moves at considerable speed, so keeping pace with such a dynamic environment requires considerable patience and an element of flexibility to ride out the bumps and identify new opportunities, be it the adoption of first price auctions, something more pressing like GDPR, or the inevitable demise of third-party cookies. When you outsource most of your infrastructure, these are other people’s problems. The more you in-house, the bigger the drain on your resource and the greater the risk in getting it wrong.
Building technology also sounds easy enough when you have good ideas and smart people, but scale will always be an important factor in delivering speed and success. Even as a large publisher, building custom integrations with the world’s largest ad tech companies still takes considerable work and influence, and delays often sit outside of your control.
Is there still a role for agencies and tech providers, and how can they adapt to ensure they work more efficiently with publisher clients, to ensure that they are still relevant and provide a useful service?
With hundreds of thousands of advertisers and more than as many publishers, there will always be the need for partners in the supply path who can help navigate and optimise the complex advertising ecosystem. It’s totally unfeasible to support that many connections and drive performance without a raft of third parties helping along the way – so the challenge lies in deciding which provide the most value, and which are surplus to requirement.
Supply path optimisation is a catch-all term that has been around for a while. It doesn’t mean cutting out the middle man, it just means helping advertisers find the most efficient ways to drive performance whilst at the same time maximising revenue for the publisher. If the cost of an intermediary service outweighs the value it drives relative to the competition, then arguably they don’t deserve to play. And just because a company provides huge value today, it doesn’t necessarily mean they’ll continue to provide as much value tomorrow.
For example, the ability to leverage scale has always been the cornerstone of media buying (ad networks, media agencies, etc), but the emergence of programmatic, continued innovation and fierce competition has torn up the rule book. These changes have enabled buyers to access 100% of the inventory available and allowed sellers to access 100% of the demand, all whilst transacting in increasingly smarter and more efficient ways. Scale is still important to help leverage pricing, but the ways in which scale is accessed have now shifted, and partners have to find other ways to add value.
Are agencies and tech providers still an essential part of the ecosystem? Absolutely, programmatic talent remains in short supply and most advertisers and publishers simply aren’t advanced or scaled enough to navigate such a complex ecosystem. That said, the barriers to taking certain elements in-house are increasingly dissolving, providing more opportunities to take greater control over advertising budgets (buy-side) and revenue (sell-side). As for the rest of the players in value chain, they should continue to adapt or prepare see their value, and therefore, bottom line consistently eroded.
What do you predict is the future of in-housing, will it be more of the current hybrid model where agencies are still a key element, or will the majority of major publishers fully in-house their sell-side tech?
The future of agencies has little do to with the influence of publishers. It is really down to the advertiser’s ability to navigate the increasingly complex and fragmented media landscape. In a fully programmatic world, talent and technology will play the major role in advertiser autonomy. But, even if the world’s largest advertisers continue to invest in in-housing (as many have done in search and social before now), there will always be the long tail of advertisers that will need support in getting the most from their media budgets. Agencies aren’t going anywhere anytime soon, however the size of their pie is coming under increasing pressure as technologies continue to develop and other third parties look to eat their lunch.
As for publishers, it’s now just common sense to take greater control of the auction logic in order to best monetise their inventory and audience. However, building server-to-server capabilities from scratch is no mean feat, and like the buy-side, only the largest will be able to make the economies work in their favour.
Header bidding also levelled the playing field for most SSPs, as unique supply is largely a thing of the past. Differentiation is more important than ever, and I suspect there will be more high-profile consolidation of the ad tech market to come, which unfortunately may only hinder the competitiveness of the market versus the duopoly.