A recent Association of National Advertisers study revealed a record number of advertisers taking their marketing services in-house, raising tough questions about the role and value of ad agencies in the future.
Historically, when the economy grows, marketing budgets and in-house agencies grow right along with it. So this shouldn’t be a surprise in itself; we’ve had strong growth since 2014. What is different?
This is no longer purely economics-driven growth. In-house agencies have become powerful. They’re doing content marketing, creative strategy, data and marketing analytics, media strategy, programmatic media and social media. The ANA study also revealed the following:
- Since 2015, 70 percent of the survey’s respondents have moved in-house the work that was formerly handled by their external agencies.
- Almost 90 percent of the advertisers now have in-house video production facilities.
- ANA-member in-house agencies are sizable: More often than not, teams of 25 or more are doing 50 percent or more of the work.
A new type of in-house agency
This increase in capabilities accompanies substantial increases in levels of sophistication and quality due to a distinct shift in creative leadership. Now it’s not unusual for in-house shops to be led by some of the industry’s creative titans. Witness Crispin Porter + Bogusky’s Andrew Keller at Facebook, Grey’s Tor Myhren at Apple and Wieden + Kennedy’s Todd Waterbury at Target. All have shifted to the client side, and in so doing they’ve opened the doors to an influx of other talent.
Another reason in-house agencies will continue to thrive is because of how complicated it’s become to build modern marketing programs. Managing the infinite landscape of media now requires dedicated resources with deep company knowledge. And new challenges in data security and the need for transparency in media buying strengthen the case for going in-house.
What’s the answer for traditional ad agencies? They need to respect and collaborate with in-house operations as never before. To do so successfully, some changes are in order. Here are a few ways agencies must adapt to meet the new paradigm.
Forget egos, foster trust
The truth is that outside agencies have a history of dismissing the talent, capability and commitment of their in-house brethren. Agencies have tended to hold themselves in grossly higher self-regard, sometimes lording it over the inside agency and hoarding the best work. Any promise for future success cannot be built without first establishing mutual respect, and it starts with recognizing each other’s legitimacy and fostering trust.
Build speed and technology into workflow
Beyond trust, aligning work styles is crucial. As speed and complexity in business continue to accelerate, higher, faster throughputs are critical. Inside agencies have built-in advantages that allow them to move fast. Outside agencies need to match their speed or be left behind.
A surprisingly common barrier for collaboration is technology. Inside agencies frequently use industry-specific or proprietary software and collaboration tools that are very different from the ones agencies use. It’s a mistake for agencies to dismiss these differences. The only path to success is to fully understand these technologies and find ways to work with them.
Collaborate seamlessly and partner with the inside
Agencies on both sides need to identify the other’s strengths and weaknesses and encourage each to use their superpowers in complementary ways. As the mantle of brand expertise shifts inward, outside agencies may well find that greater value comes from their insights and perspectives on technology, culture and audience. Outside agencies can also offer a broad diversity of experience to help expand thinking in ways that in-house agencies can’t.
Exactly where and when outside agencies add value might change significantly, though. For instance, instead of building compelling integrated programs end-to-end, outside agencies might better serve clients by creating the conceptual grist for the in-house agency to scale across myriad touchpoints.
The final takeaway: Things have changed. Smart, forward-thinking agencies can thrive with in-house departments. But that success must be built on respect, collaboration and a focus on the value in-house agencies need most that outside agencies can deliver.
This article originally appeared in The Drum.