Year in Review: The Advertising Agency Landscape – In-House Agencies

The marketing landscape is continuously changing, and 2015 was no exception. Mergers and acquisitions, the rise of activities with independent agencies, and the growing popularity of niche advertising agencies are some of the biggest trends that shaped the agency landscape in 2015, and will continue to do so as we enter 2016. Independent agencies are gaining popularity as a result of companies becoming increasingly interested in transparency with their advertising partners. Along the same lines, companies are decoupling agency work away from outsourced services and bringing them in-house to increase control and transparency of their advertising content. Decoupling, when advertisers choose to separate the production components of a campaign from the creative or strategic portion, has been used in a number of different marketing categories, including media and digital.

Brands today, more than ever, are specifically bringing creative, digital, and a wide range of agency services in-house, bypassing outsourced agency efforts. According to The SoDA Report, in the past year there has been a dramatic spike in the number of companies who no longer work with outside marketing agencies — 27 percent, up from 13 percent in the previous year. The result of this movement is being ignited by the need for companies to reduce costs dramatically while simultaneously increasing efficiencies, generating frequent content, and develop close relationships with their consumers.

In 2015, an abundance of Fortune 500 companies, such as Facebook, Instagram, and Allstate Insurance, are exponentially bringing creative agency work in-house, eagerly wanting to connect with their customers in innovative and engaging ways. These companies; they are doing this by leveraging segmented data analytics to cultivate targeted content marketing through social media and digital platforms. Facebook’s in-house agency, Creative Shop, works with brands such as Budweiser, Ford, Sprint and Toyota, to create custom branded videos to run on the social network’s platform, as well as develop tools for small and medium sized businesses to use when drafting campaign ideas (Advertising Age). Facebook has also recently hired the former CP&B, an advertising agency, CEO as the global creative director of the social network’s in-house agency in early January 2016; this indicates the forward momentum Facebook is taking to expand their internal creative agency. 

Likewise, Allstate Insurance brought its digital media-buying fully in-house, early 2015. Allstate’s programmatic buying, which makes up 70% of their media plan, moved away from their long-lasting relationship with Starcom and moved in-house not only for cost efficiencies and targeting abilities but has had programmatic experience in the past and felt comfortable doing so. Allstate’s relationship with Starcom is not final and will continue on the strategic side to gain market knowledge, content and data analytics.  

Digital and social marketing rely heavily on data-driven analytics and insight extraction to formulate and develop segmented and targeted social/digital campaigns. While big data can certainly improve a brand’s marketing efforts, little data is swiftly becoming the new data forefront allowing brands to cultivate closer consumer relationships by allowing strategic opportunities to present themselves. Little data is utilizing the right kind of information to extract actionable insights for effective marketing; it encompasses the “nuts and bolts” metrics, derived from Big Data, to allow companies to personalize content to their consumers. Historically, agencies provided marketers with reports of impressions on their campaigns; however, recently brands are building their internal teams to have core competencies in data analytics. For example, the U.K. Post Office has been putting more weight on building internal data analytics and has brought content operations in-house. Specifically, they, along with other marketers, are bringing data insight development in-house in order to more quickly respond to their consumers. These in-house teams have the ability to respond to consumers at a swifter pace - immediately discovering what campaigns are/are not driving engagement and providing the insight to adjust course as needed.

In a socially intensive world, brands need to execute continuous and relatable content around the clock, whereas the traditional agency model is not necessarily built to fully support this trending necessity. Along the same lines, there are a vast number of approval layers that content must to pass through before reaching the client, which causes bottlenecks for agencies trying to keep up with their clients’ needs. The traditional agency is quickly trying to adapt to the need for this type of on-demand support. The need for this key, strategic competency is increasingly compelling for brands to decouple this agency service and develop the internal talent to provide these insights.

So what does this mean for marketing procurement? Research indicates that, among those companies that have a marketing procurement department, 45% say procurement is somewhat or more influential in deciding to move agency work in-house, but only 5% are “extremely” influential and 10% “very” influential; this influence is likely to rapidly grow in 2016 and in the next upcoming years. The burning question for marketing procurement professionals and CMOs is whether the quality of work that results from an in-house agency can measure up to that of an external agency. Another key question is also whether or not bringing creative work in-house will yield savings and increase ROI.  Moving away from outsourced agencies can pose some concerns aside from economical savings. These concerns center around the people you hire, as your only real assets are those you hire and their skills, ensuring objectivity remains present when recommendations are made, holding each person and project accountable, as every agency knows that its relationship with a client relies on the success of its project output, and continuously investing in creativity. Marketing procurement can develop strategies and assist in making these decisions by understanding the project objectives, mapping out the category profile, which includes marketing spend and contractual analysis, to truly measure the quality and quantity of potential savings from transitioning to an in-house agency structure.

In-house agencies are on the rise and brands are hiring top talent from existing agencies at a rapid pace to help supplement this need to recruit experienced professionals. This rise in popularity of in-house agencies has created an interesting dynamic for the agency landscape. Traditional agencies are now longer competing with each other, but also with their clients’ internal talent. According to Campaign, creative agencies are not well placed to survive unless they distinguish themselves with exceptional skills and content, and even then agencies will need to continue to push their creative boundaries, develop exceptional skills and innovations, and continue to provide high value to their clientele in order to remain competitive in this shifting agency landscape.

Reference: http://smmadvertising.com/house-outside-advertising-agency/