Although much of the talk about marketers in-sourcing programmatic media has focused on threats to big-name agencies, it may be smaller, performance-driven shops that feel the heat as clients shift their media buying in-house.
EQ Works, one of only a handful of public ad tech companies in Canada, saw this firsthand last year.
“One of the things that impacted us year was that we had a large U.S. company that we were doing a lot of work for — a lot of good work, based on their own results — and they just decided this was something very strategic that they wanted to bring in-house,” EQ president and CEO Geoff Rotstein told Marketing.
It was one of the main reasons for the 54% revenue drop versus Q1 2014 that EQ reported last week, he said.
Although several major advertisers, like Procter & Gamble, have made the decision to in-source programmatic trading, agencies have been mostly dismissive of the trend. Clients have always gone through cycles of in-sourcing and outsourcing, the argument goes, and in the long-term they won’t have the flexibility to build the kind of expertise they’ll need to keep up with the rapidly changing online environment.
That may be true for the P&G’s of the world, but mid-size online businesses, especially e-comm retailers, have shown themselves to be quite nimble in online advertising. Performance advertising still dominates the programmatic marketplace, and it’s getting easier and less expensive for small and mid-size businesses to start running acquisition and retargeting campaigns in-house.
That may be part of what’s driving smaller ad tech players to pivot towards self-service platforms, which marketers can license for their in-house trading teams. Acuity Ads, which also reported its Q1 results last week, says that sales of its self-serve platform are up 157% since the same quarter last year. SourceKnowledge, Eyereturn and Addictive Mobility have also recently launched self-serve options.
Rotstein says that if marketers are in-sourcing for strategic reasons, rather than just to cut costs, then they may very well find long-term value an internal trading desk.
“I think a lot of it comes to whether it’s a strategic imperative for the company, or whether the company just thinks it’s an additional way for them to make margin,” he said. “If it’s, ‘Hey, it’s an additional way to make margin!’ they’re going to realize that nothing’s ever as easy as it looks, and it’s pretty expensive to maintain a technology and a team that’s up to speed with everything.
“[But if] strategically this is a key part of the business… they’re looking at that and saying, ‘This is an investment that we want to make, because over the next five to 10 years, having this in-house will allow us to differentiate ourselves.'”
Rotstein played down EQ’s revenue drop, pointing out that revenue was up 19% over Q4 2014, and has risen steadily since the big account loss last spring. He said that despite the account losses, EQ is fortunate to have a long-time base of clients, many of them smaller agencies, that are continuing to grow their business month-to-month.
EQ has also managed to cut its operating loss by 45% since Q1 last year, something that’s proven elusive for a lot of ad tech startups that are under a lot of pressure to expand.
“Our focus over the last year has really been on making sure that we can build an amazing audience targeting platform, that will allow us to work as well in display, video and mobile,” he said, adding that the company brought on several new developers last year to help building out its mobile capabilities. “I think the end result is we have a platform that’s functioning exceptionally well for our clients.”
