When they write the history of programmatic advertising, June 2014 will go down as the month when you needed two hands to count the number of big advertisers running their machine-driven media buys in-house.
Procter & Gamble, American Express and Mondelez all recently joined the small club of brands embracing exchange-traded media (existing members include Kellogg's, Kimberly-Clark, Unilever, Netflix, 1-800-Flowers and Allstate Insurance). And not only have they joined; they are making large commitments.
P&G reportedly aims to migrate 70% of its digital media investment to programmatic channels this year, per Advertising Age. That pledge will hit the marketplace "like a ton of bricks," said Josh Jacobs, CEO of Omnicom Group's Accuen programmatic buying unit.
And others agree.
"Whatever Procter does, eventually everybody else does too," said Matt Seiler, CEO of Interpublic Group's Mediabrands. "I think it's really exciting. I love that we're getting to a point where we can strip away the inefficiencies."
For agencies, the long-term impact of marketers becoming fully awake to the programmatic toolset remains to be seen, but the overall trend is clear. Clients will increasingly drive the discussion, rather than acceding to agency recommendations as they often have in recent years.
Trivedi expects to see more brands make big programmatic commitments and sign contracts directly with demand-side platforms (DSPs), even when their agencies are most directly involved in managing the software.
In the coming months, many sources agree, dozens of global brands will take a closer look at their programmatic strategy.
It's still unclear how that process will play out and what the preferred service models will look like. Is there still a place for the centralized holding company trading desk? Will programmatic capabilities be more tightly integrated at the media agency level? Will marketers simply use the managed services provided by their DSPs? Or will they really be pulling the DSP levers themselves?
The answers are predictably complicated, and often vary from client to client and agency to agency.
One model is to set up so-called "private trading desks" that are effectively a partnership between agency, DSP and client. Under this approach, a small team housed at the media agency typically handles programmatic buying activity for one client only, perhaps relying on managed services from the DSP, and the holding company trading desk is not involved. This approach has been employed by WPP Group-owned Mindshare on behalf of clients Kimberly-Clark and Unilever, both of which prefer not to work with WPP's Xaxis trading desk.
Some believe the holding company trading desks need not be banned from these private desk arrangements. Mondelez also has created a private desk in partnership with its agency, Publicis-owned MediaVest, but the holding company desk – VivaKi Audience On Demand in this case – is involved.
"Because it's scalable and impacting every aspect of the business, it is less about holding company trading desk or not. It's about my entire business," said Trivedi. "If the trading desk has a role, awesome. If not, OK."
Regardless of the model, Trivedi would like to see more realism from DSPs and clients about the services requirement around programmatic buying.
"Often these companies will pitch business to a client about automation, but forget to tell them what they're pitching is a lot of self-service. Who's going to manage it? You need someone to go in, look at the buys, make the buys, optimize," she said.
Indeed, the direct-to-brand sales activities of DSP companies have ruffled plenty of feathers in the agency world.
One senior marketer with a large wireless carrier has already met with general and video specialist DSPs eager to sign contracts that would effectively circumvent the agency relationship.
"These players are careful, as they should be," he said of the DSPs. "If they get shut out by the agency, they're done, their company is done."
But he also said DSPs can't ignore the opportunity to go direct. "So many big companies are starting to internalize this stuff. Some of this (programmatic buying) is pretty straightforward. I've got more complex stuff going on the ecommerce side."
Even assuming the client and DSP allow room for the agency's involvement, using an insulated, private trading desk might not be the best tactic. One problem with the approach is that it prevents agencies from innovating, according to Sarah Sikowitz, a Forrester Research analyst focused on agencies.
"It doesn't make sense to have a small specialist team within a larger group that does programmatic for one client," said Sikowitz. "You have to be able to train and scale. And if you've got two or three people that are trained on this one thing and it can't be used on other clients, all the knowledge just sits with them and isn't being distributed throughout the team. You've created a problem where you're very reliant on one piece of business for a section of the services you provide."
Arun Kumar, a senior executive at IPG's Mediabrands Audience Platform trading desk, has similar reservations. At IPG, unlike WPP and Publicis Groupe, there are no private desks – only the centralized programmatic buying division.
Agencies don't like the private trading desk model because "you're only looking at bids that come on one client, one type of audience and one type of content," Kumar said. "How do you understand what's happening in the market?"
Additionally, success still depends on integrating with a large number of technologies, and a small private desk working with one or two technologies can't pull that off.
"There's the mistaken belief from clients that if they take all this in-house, they'll somehow sort it. This ecosystem is even more complicated than the traditional ecosystem. I don't think companies appreciate the amount of investment it takes," Kumar said. "It's not about getting two DSPs and a couple of full time employees on it. If it's a managed service, that's not programmatic. That's me calling the Turn guy and saying here's an I/O."
Still, the internalization of programmatic capabilities by the marketer is a real trend.
The unnamed senior marketer quoted above said, "The more I look into programmatic, the more I look into partners, the more I see pressure on the agency model. That's going to be a storyline over time."
He continued: "The old school mentality is, I've got an agency I can fire if things don't work. The new school is, I need control of the data. I don't want any risk that I'll be part of a 10-client deal. I want to be part of a one-client deal."
If agencies are to remain involved in programmatic buying – as many believe they must – they need a good way to get paid. Billing on percentage of spend or the number of full-time employees are no longer viable options, since the first incentivizes waste rather than efficiency and the latter incentivizes large headcounts. Both are anathema to the programmatic opportunity.
Here's how Mediabrands CEO Matt Seiler expressed it in a recent AdExchanger interview: "If you push for automation you've got to find a different way to be compensated. Because if it means you stripping out a bunch of bodies, we're not all just going to make less money. We need to make money based on something that is more important than spend or body count."
Agencies seem ready to accept a more assertive role for the client in managing programmatic spend. Indeed, many sources on the media agency side have expressed relief that clients are insisting on more control over the tools and that the centralized desks appear ready to yield to those requirements.
As MediaVest's Trivedi said, "Our trading desk is saying, 'OK, one size doesn't fit all. If your client wants to execute media on this platform, perhaps it's a service layer.'"
Such conversations would not have happened two years ago, she said.
"The conversations are much more transparent now, and much more about the client needs, and what is the right structure to serve those needs. It makes everybody happy," she said. "This is the future, and it's good. We can't shy away from it."