In-Housing Isn't Agencies' Biggest Challenge -- It's Growth

It's interesting to see the World Federation of Advertisers (WFA) coming out strongly against the hype surrounding in-housing.

Its researchers have started out by looking at creativity where some of the loudest noises about in-housing have been heard recently, and came to the conclusion that aligns pretty much perfectly with what I've been hearing from the London ad scene.

In-housing is happening, but it's largely restricted to short turnaround, low-cost work. There is also some in-housing of content marketing and running influencer campaigns, but the WFA research points out that this still leaves a lot of traditional work for agencies. 

In particular, the researchers point to "big ticket" creative strategy and execution as well as search and media planning and buying, which 50% of respondents said they were due to spend more on in the future through external partners. 

The point may be underscored perfectly by one of the areas where it would be easy to imagine in-housing would be at its highest. With so much tech allowing brands to run their own programmatic digital advertising campaigns, it may come as a surprise that brands are not only looking to carry on with outside providers, but 45% are expecting to spend significantly more and 35% are planning to increase spend to some extent. 

The overall message from the WFA is not to believe the hype and become too disheartened if you're at an agency.

So yes, in-housing is happening -- but brands are still relying on the creative talent agencies offer, as well as the tech and skills they have in media and search. 

When I've talked with leading agency-side execs in London about in-housing, this is pretty much along the lines of what they've been saying. Brands, they say, still see the benefit of working with experts at agencies and they realise having tech is one thing, while having the guys to run those tools and use them effectively is another matter entirely. So they are feeling pretty confident that third parties will stay in demand.

However, that is not to say that only rosy days lie ahead for agencies. To the contrary, most realise that there is now less money, or at least less margin, involved in traditional work and much of the new money coming into advertising is digital.

Almost by definition, that means the duopoly of Google and Facebook will be the main benefactors. 

The big task ahead now is for agencies to become more relevant to how clients reinvent themselves digitally.

Yes, we're talking that huge cliche of digital transformation,  and that is where I'm hearing agencies are desperately trying to make headway. They want to be agents for growth -- the partner that helps a client spot new ways of doing business over relatively new channels.

In short, everyone wants to be the agency that advises McDonald's to fit digital ordering screens. That is, of course, in addition to being rather partial to their top-level creative work, media account or search brief. 

Margins are being squeezed, and holding companies are merging agencies to offer a simpler structure for advertisers, so this is not a time of business as usual for agencies.

Sure, in-housing is not totally blowing them out of the water, but unless they can pivot to also be partners for growth or digital transformation consultancies, many will struggle. 

1 comment about "In-Housing Isn't Agencies' Biggest Challenge -- It's Growth".
Check to receive email when comments are posted.
  1. Michael Farmer from Farmer & Company LLC, June 20, 2019 at 8:06 a.m.

    You absolutely nailed it. 
    Growth, rather than cost reduction, needs to be the new imperative. 
    Decades of agency cost reduction and ‘juniorization’ have crippled agency capabilities, making it more difficult for agencies to give meaningful transformation support to their clients. 
    So, to achieve higher levels of growth, agencies need to negotiate remuneration based on Scopes of Work (something that they do not do) and begin to upgrade their skills. 
    This means investment and more modest margins. 
    Agencies need the support of their holding company owners for this type of program. WPP under Mark Read is already heading in this direction.
    Michael Farmer
    Author, Madison Avenue Manslaughter

Next story loading loading..