Connect with us

Hi, what are you looking for?

Online Business Success

The Truth Behind The Technology


Mike Lane is the CEO of Fluency, providers of Robotic Process Automation-powered solutions for the digital advertising industry. 

I often hear the following: “My board is concerned we’re giving up value by not investing in our own advertising technology.” The idea that proprietary ad tech should add value — like other intellectual property would — is a good one; the question of if you should make that investment isn’t a simple one to answer, though.

Like any big decision, your considerations should be rational and include things you can estimate or calculate like money, time and ROI. You need to understand the math upfront (especially when developers are promising you the world) since this is where most of the mistakes are made.

Before building your own advertising platform, ask:

1. How is your company valued, and what factors influence the multiple for your valuation? Most companies I see are valued on one thing: recurring monthly revenue, which is your multiple based on market sector, growth rate, churn and profitability. 

Advertisement. Scroll to continue reading.

2. How do you maximize ROI via advertising spend? Advertising execution is usually the biggest cost after the ad spend itself. This is where agencies and in-house marketing teams need strategic decision-making to ensure actions are in line with company objectives. They often aren’t.

3. What’s the cost of building the technology versus buying it? Building ad tech is complex and time-intensive.

Development Costs

Building your own marketing-focused tech stack is a noble yet daunting task. It takes years to stand up and demands an endless amount of maintenance and refinement. There are new ad types, channels, APIs, integrations and data sets — and they change quarterly.

This isn’t a one-person job; companies typically have dozens of people focused on developing it, making it work and maintaining it. Since you’re dealing with multiple channels, stakeholders and needs, what’s often being built are isolated tools rather than a cohesive, holistic platform. I’ve only seen a few companies pull this off well in the past 20 years.

As you calculate the dollars for this investment, factor in hardware and software costs, additional, specialized headcount and the soft cost of retasking existing team members.

Common Threads In Unsuccessful Ventures

Some perspective on the price of entry here: I know several companies that have spent eight figures and walked away from that investment with virtually nothing to show for it. Among these failures were common threads:

1. This technology demands expertise and experience simply to understand the subtleties of the space. Getting a dev team up to speed on advertising and advertising tech — while designing a system — takes years, not months.

Advertisement. Scroll to continue reading.

2. Engineering teams are often pulled in other directions — usually higher-margin business. In-house software projects seldom get enough priority to succeed.

3. When you try to prove the efficiency gains (and ROI), it doesn’t pencil out in the short- or long-term. The CFO is left scratching their head and cutting the project. 

Next, layer in time; more than your team is estimating, and more than you’ve probably got to spend. Time in advertising is driven by consumers, their reality and wherever they’re heading in the future. Since you can’t predict that future, it makes more sense to look for ways to save time rather than lose time trying to build a system that might be obsolete shortly after it’s up and running.

Areas For Focus

If you’ve considered all these things, and still want to invest in in-house ad tech, the areas of focus should include:

1. Ensuring you have good data since it will power your advertising. Is it clean, accurate and relevant? If data isn’t a key part of your strategy, you’re way behind.

2. Enabling that data to be used; it needs to be easily exportable, accessible, updateable and manageable.

3. Building an attribution mechanism; tracing the effort from idea to sale is critical.

4. Building business intelligence reporting. Will the tool provide information that supports your value prop?

Advertisement. Scroll to continue reading.

These aren’t headliners, yet they’re more important than what people who push to invest in an in-house solution usually emphasize. If not committed to and realized, they’ll severely limit the effectiveness and sustainability of anything you create.

From an investment standpoint, trying to build an ad platform represents an extremely risky bet where more companies have lost money, time and opportunity than have succeeded. Is the payoff worth that bet? From a numbers standpoint, it most often is not. 

Value Proposition

The C-suite should consider how the expense of advertising execution relates to the company’s value proposition — its core business. Is the current approach additive? Is it a liability to the value prop? Or should it be redefined?

Consider how a carpenter’s value prop isn’t in the tools they own, but it’s in their ability to use those tools and create something of value. Conversely, you don’t see Stanley building houses — they focus on their value prop: making tools. In an age of rapid change, no brand can efficiently, profitably and sustainably build and use these types of tools at the same time.

What’s your value prop? Hopefully something unique and ownable. No part of your value is tied to having your people log into Google Ads and Facebook to launch campaigns. If you’re trying to build your own tool, the best that tool can ever do is complement your value prop (assuming it works efficiently and effectively in the first place). It won’t become your value prop.

Taken together with the hard and soft development cost factors, the value prop question is especially relevant if you’re considering this kind of investment for use by an internal marketing team. You know the math involved in justifying capital expenditures for initiatives that improve the bottom line because they’re calculable: Expanding capacity, reducing material costs, improving distribution, adding SKUs, etc.

So how do you rationalize these costs and considerations, coupled with high risk for something that at best might bring efficiencies to only a subset of your marketing efforts? In most cases, if you are playing it smart, you don’t.


Forbes Business Council is the foremost growth and networking organization for business owners and leaders. Do I qualify?

Advertisement. Scroll to continue reading.



Source link

Click to comment

Leave a Reply

Latest

Social Media

As it looks to add more ways to help creators to build their presence, and monetize their work in the app, Facebook is launching...

Technology

In context: Tensor cores have been one of the main advantages of Nvidia’s RTX graphics cards, enabling machine learning-based image upscaling, which significantly improves...

Online Business Success

Small Town Cultures pickles. Small Town Cultures Small Town Cultures A family-based fermentation company located in upstate New York, bring simple, clean fermented foods...

Social Media

Snapchat has officially launched its new Snapchat+ subscription service, which will enable users to pay a monthly fee in order to gain access to...

Top Stories

Bear markets can be incredibly harsh for projects that have little adoption or lack an applicable use case, but projects that dedicate to building...

Technology

In context: You are probably familiar with the three more prominent single sign-on services (SSO) — “sign in with” Google, Facebook, and Apple, but...

Advertisement

You May Also Like

Uncategorized

Introductions get a lot of attention. I’ve explored the topic of how to write them even though as a reader, I always skip them....

Online Business Success

The internet is now our nervous system. We are constantly streaming and buying and watching and liking, our brains locked into the global information...

SEO Guide

There are all kinds of pictures of the world on the internet, but to find one of these specific pictures that you want to...

Online Business Success

You can think of link building in many ways. I like to call it tedious, painful, and a test of patience. It’s also necessary...

Advertisement