Commentary

In-Housing Is Not Killing Creative Agencies -- Though It IS Hurting Them

Unilever recently reported it had saved about $500 million in 2018 by taking agency services in-house. This news was immediately followed by a barrage of conversations that went like this: “Did you see the reported savings that Unilever has made because they in-housed all agency services/got rid of their agencies?”

Let’s put the money in perspective. $500 million is nothing to sneeze at, but at the same time, Unilever spends about $7.2 billion on marketing worldwide (2018 numbers, per Statista). And it has not “gotten rid of” or “in-housed” all agency services.

What company strategists have done is look at where they were spending, and what contribution their various investments were making to what ultimately matters most: sales. They decided that certain marketing cost buckets were going to have to do with less, notably production cost and promotional spend. In order to accomplish this, they realigned their agency ecosystem, which has meant a decrease in the overall number of agencies used.

Unilever also created the “U-studio,” its in-house agency in collaboration with Oliver, a specialist in-house agency services group owned by New York-based You & Mr. Jones. The strategy, as revealed by Unilever, was to produce "more content in-house while making existing assets go further” and to increase “spend in areas driving growth, such as digital media and in-store.”

When I tweeted about Unilever’s gains as a result of its in-house strategy, someone quickly and rightly reminded me that “everything that is old is new again,” because Lintas (which stood for Lever International Advertising Services) was, way back when, Unilever’s in-house agency, which it sold to Interpublic.

Unilever is not alone in the in-housing trend as we all know. A study from 2018 among 412 US Association of National Advertisers members showed that 78% had moved to in-house solutions, up from 58% in 2013. About 76% of marketers said that creative services were moved to in-house agencies.

It is important to recognize definitions here. When 75% of ANA members say they have moved “creative” in-house, this can mean a lot of different things. In an advertising agency context, “creative” usually stands for everything from strategy, consumer insights and consumer journeys to consumer personas to creative development, testing and production/execution.

And I don’t know of many clients that have moved all of that in-house. Typically, marketers still rely on agencies to come up with the goods in terms of strategy, insights, core creative idea and some of the executions. Once a framework — or, if you will, creative construct — has been developed and approved, the in-house unit can easily, quickly (and cheaply) translate this into executions, typically for the digital space.

There are many variations to this model, which is why it’s so important to remember that there is no “right” or “wrong” approach to in-housing, only “good” and “bad.” I have written about this many times and will repeat it here: “bad” is guaranteed by things like doing it without defining and understanding the role for each of the parties (for example, marketing, sales, agencies, service providers, and the in-house unit). Equally important is to define HOW the in-house unit will work with all the other parties, i.e. a NEW way of working.

One thing is certain: in-housing is here to stay, and it marks probably one of the most profound moments of change impacting the advertising and marketing industry. We are only in the first chapter.

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