Insourcing versus Outsourcing Ad operations cost comparison and analysis

AdOps is to marketing what plumbing is to homeownership: a task that’s essential to get right, and thus best left to the people who have experience delivering error-free work.

In terms of ad ops, outsourcing to a firm whose sole purpose is managing any or all aspects of campaign management can deliver error-free work save publishers, ad tech platforms, agencies, and brands between 50% – 70% in ad operating department costs.

Let’s break this down.

The Real Cost of In-Housed Ad Trafficker

According to Salary.com, the average AdOps associate salary in the U.S. is $63,775. That sum is likely to rise given the very real Great Resignation. All over the country brands struggle to fill open positions, and many are resorting to sizable signing bonuses to lure staff to their ranks. And, marketing salaries are on the rise, some have grown by as much as 50%.

Besides, an annual salary is just the starting point, there are a lot of other costs involved with keeping full-time employees on staff. According to the Small Business Administration, “There’s a rule of thumb that the cost is typically 1.25 to 1.4 times the salary, depending on certain variables.”

Where do those extra costs come from? They start with payroll taxes, which are mandatory. A brand’s share of FICA, aka Social Security. That rate is 7.65% of the AdOp team member’s compensation up to the annual wage base, which is $132,900 in 2019.

Next, you’ll need to pay an unemployment tax to the State in which that employee works.

Now let’s talk about bennies, one of the most valuable recruitment tools available to companies when seeking talent. Unless you manage your 401(k) internally, the annual administrative costs per employee range from $750 to $3,000. And, of course, there are your matching fees, meaning your company contributes an amount that matches what the employee puts in until a cap is reached.

Then there’s healthcare. According to the Kaiser Family Foundation, the average 2019 cost of insurance per employee for family coverage was $20,576 with workers on average paying $6,013 towards the cost of their coverage. They may be higher, depending on what you cover (dental and eye care cost more).

Now let’s talk about life insurance, which typically costs $.16 per $1,000 covered.  If like most companies, you offer a coverage amount that equals the employee’s annual salary, you will pay a $3,188 life insurance premium for your internal campaign trafficker.

Once they’re on staff you’ll need to supply them with the tools of the trade: a space to work, a computer, software licenses, communications fees, and other perks you may offer, like Pizza Friday, coffee, and snacks.

Those costs can vary, but for argument’s sake, let’s say you’ll pay for basic office software, which averages about $500 per year. Additionally, you’ll need to spend a week or two training that employee on your internal systems, and it could be a month or two before that employee is operating at full capacity.

There’s another hidden cost that is quite substantial: turnover. Over 30 million people left their jobs from January to August 2021; that’s one out of every four workers. As it is, AdOps is viewed by many employees as an entry-level position, a stepping stone to bigger and better things. And in this day and age, poaching is incessant, so you can expect your newly hired AdOps trafficker to receive competitive offers from headhunters once his or her training is complete and has gained some experience.

So what will it cost to replace a new hire? According to the Society for Human Resource Management, in 2017 the replacement costs for digital media advertising can reach as high as 50% – 60% of the employee’s annual salary. But again, if the Great Resignation continues unabated, you may need to factor in a signing bonus.

Efficiency Gains from Outsourcing

There are also efficiency gains to be had with an outsourcing partner. Take Paragon as an example. Our teams currently support 50 brands, publishers, agencies, and platforms with some or all of their ad operations.  And we have expertise with over 150 technology platforms, tools, and solutions.

Thanks to this deep technical platform expertise and broad client list, we can generate a 20% – 30% efficiency gain when we take over AdOps work from a client.

Intangible Benefits of Outsourcing

Finally, there are numerous intangible benefits to outsourcing, beginning with less distraction that stems from high turnover rates. When an ad trafficker quits, other employees need to step in to do that work until a replacement can be found. That’s a heavy burden.

Equally important, when you free up your employees from the mundane, but highly demanding, campaign trafficking work, you can reassign them to more strategic, and personally satisfying roles that promote client satisfaction, grow revenue and strengthen your partner ecosystem.

Refocusing your employees to the more satisfying work is a virtuous cycle of benefits. Turnover is lower, you can keep that earned knowledge in-house instead of losing it to a competitor, and all the costs of recruiting can be put towards acquiring new customers. Get in touch if you like to know more.