The following is an exclusive guest contributed post to MAW from Galia Reichenstein, COO & Head of Sales at Taptica.
Ad tech is embracing the software as a service (SaaS) model, in part because of consolidation within the space, but also because investors love the idea of subscription software and the predictable revenues it brings. On the customer side, marketers are also supposed to love the idea of taking their ad operations in-house because they gain control, transparency, and in theory, costs are supposed to go down. In recent years, we’ve seen a handful of brands take advertising in-house. But many other advertisers have balked at the idea of taking their media operations in-house, especially when it comes to mobile. Why are so many advertisers reluctant to adopt a SaaS model for mobile? As it turns out, there are several good reasons why brands should embrace a managed vendor relationship.
Technology and data
Mobile technology moves incredibly fast and innovation hinges on data sets that are much larger than a single advertiser can accumulate. Brands that go in-house can build their own knowledge base, but unlike a competitor using a managed solution, those brands will always be limited by their own technology and data, both of which reflect only a small fraction of the wider expertise and innovation in the marketplace.
So how can advertisers make sure they’re leveraging the best data-driven innovations in the marketplace? They need to stay nimble. The significant in-house investments needed to work with a SaaS provider incentivize rigidity over the long run because each new development cycle forces the advertiser to weigh the opportunity of new solutions against whatever investments they’ve made to integrate SaaS into their operations. Rather than taking on the challenges of building an in-house mobile ad operation, advertisers should put their focus on seeking out managed vendors and holding them accountable for delivering the technology and data necessary to thrive in the mobile space
Cost savings aren’t what they seem
The cost of using fully managed software can run between 20 and 30 percent of the campaign. Typically, SaaS providers charge somewhere between one and five percent. At a glance, taking mobile media operations in-house looks a lot more cost effective because the advertiser can dramatically reduce fees. But focusing solely on fees misses the larger question of cost.
Software is about learning by doing. Initially, advertisers that use a SaaS solution will see a steep and costly learning curve as their teams experiment with a new tool. Over time, the costs associated with learning will dissipate, but as the advertiser becomes more sophisticated they’ll reach a deeper understanding of the skill and talent needed to run a mobile media operation. In effect, the advertiser will trade managed vendor fees for the high cost of recruiting, training and retaining qualified staff. But unlike the managed vendor fee, which the advertiser can bid out to a competitive marketplace, the costs associated with an in-house operation become a lot more difficult to control over time.
Complexity is increasing
Mobile advertising is a lot more complex than the cookie-based desktop model. Self-service ad buying and management tools provided by Facebook and Twitter, for example, offer an initial solution. But eventually campaigns grow too large and complex to maintain and optimize manually, or the cost-per-action makes self-service unprofitable. At that point, advertisers look to either a SaaS solution or a managed vendor.
The challenge with a SaaS solution is that software can only do so much to mitigate complexity. Ultimately, the advertiser must choose between developing in-house expertise to take full advantage of SaaS, or holding a managed vendor accountable for staying on top of an increasingly complex space. If mobile technology were static, it would be tempting to develop that expertise in-house, to “set it and forget it,” if you will. But mobile technology isn’t something you set and forget. For example, Facebook frequently makes changes to their system and Facebook Marketing Partners need to keep their systems updated to match Facebook’s speed. Staying current is a full-time job, one that’s better left to a managed vendor, especially as cross-channel becomes more important and complexity grows.
Transparency and control
There’s a persistent myth that in-house offers greater transparency and control than a managed vendor. These are critical issues, of course, but to make that comparison, advertisers need to consider specific partners, not the industry as a whole. A quality managed vendor should offer real-time access to campaign performance and insights through a dashboard that gives the advertiser total transparency. Likewise, a managed vendor can give advertisers just as much control as a SaaS solution, provided they offer a clear and accountable approval process.
But transparency and control are the means to an end. Advertisers select partners that help them achieve their objectives. The choice between a SaaS solution and a managed vendor can be analyzed by comparing the relative offerings in a variety of categories, from technology and data, to cost and complexity, to transparency and control. But in the final analysis, advertisers have to ask themselves only one question: can they build and run the best campaigns on their own, or do they benefit from working with expert vendors they can hold accountable for delivering results?