In-Housing Threatens Agencies

Who would want to be at an agency these days?  Pitch after pitch after pitch, controversy after controversy, new vendors every time you turn around, competition from (comparatively) new entrants.  It’s no life for someone after a quiet life, that’s for sure.  And now along comes a new threat: clients taking parts of the media agency role in-house, reducing their reliance on their partners and threatening agency revenue.

It’s not a new idea.  Clients have in the past taken aspects of the media role in-house.  Once upon a time P&G famously did their own media negotiations and even their own spot buying, sending lists of what they had bought to their agencies to enter into their systems.

Also, in one or two cases (Kobalt in The Netherlands; Debis in Germany) media agencies owned by one or more clients appeared on the market, although they didn’t tend to last long.

But this time it’s different.  What we have now is a dangerous (for the agencies) confluence of three factors.

First, clients no longer fully trust the network agencies.  We all know this, as there is a mountain of anecdotal evidence and research to support it.  It’s a fact.

Second, major vendors like Facebook have large client-facing teams prepared to work with the client directly and to disintermediate the agency.  They promise access to data, smart analysts to use that data to make the most out of the platform and advice on how best to use the channel creatively.

Third there’s our old friend “data.”  This little word covers a huge range from industry-wide studies through to the client’s own first-party data.

Increasingly clients are deciding not to hand their data wholesale over to their agencies.  In part this is a trust matter, in part they don’t believe that agencies are qualified to manage their data needs, and in part it makes it a whole lot harder to change agencies if all your data is tied up somewhere inside your erstwhile partner’s systems.

In theory in-housing allows clients the chance to develop their own ways of working on aspects of their media activities, using their own data to benefit them and them only.  That this is both real and trending isn’t in doubt.  According to the ANA, in the US 78% of advertisers “have some form of in-house team, up from 58 percent five years ago.”  Yes, the scale of budgets and the very nature of U.S. media means that the scale won’t be replicated everywhere but more and more advertisers are doing more and more themselves.

In-housing can take different forms, from hiring a media specialist to keep an eye on the agency to taking control of data-driven programmatic deals to the creation of a fully-integrated in-house media agency.  Many will find it appropriate for their business to stop at the “bring in an expert” stage, while others will do more.

The implication for agencies is clear.  They should have several in-built advantages.  They tend to hire creative thinkers who work better in a creative environment.  They bring experiences across multiple advertisers.  They have easy access to a full range of specialist services which they can bring to bear on an advertiser’s problems.

The best will see in-housing as an opportunity to reset the relationship and redefine their value-add.  The worst will chunter on about how this is a mistake that advertisers will soon recognize.

The critical words above are “should have.”  Whatever they may say in public everyone involved knows that far too many of the network agencies have long neglected the importance of planning in favor of short-term, buying-led strategies designed to benefit themselves.

They’re now in a mess of their own making.  And the mess risks getting a whole lot more serious with the involvement of the FBI.  Watch this space and (if like me you’re a fan of what the best in agencies can do) weep.

About Author

Brian Jacobs spent over 35 years in advertising, media and research agencies including spells at Leo Burnett (UK, EMEA, International Media Director), Carat International (Managing Director), Universal McCann (EMEA Director) and Millward Brown.

Appered first in MediaVillage