Agency feathers were twisted in all directions when Apple launched its internal creative agency back in 2014. Triggered by growing frustrations that its ads had become lacklustre, the multinational tech giant’s famed relationship with its global creative agency of record TBWA was put to the test.
Working together since 1984, TBWA helped Apple launch its first Macintosh. The agency was also behind the Think Different campaign in 1997 and in 2006 opened up the Media Arts Lab (MAL) as a bespoke division dedicated just to Apple.
During the Apple vs. Samsung patent case though, an email sent in 2013 from Apple’s VP of Global Marketing Phil Schiller to TBWA/Media Arts Lab President James Vincent revealed the company had lost faith in its long-time partner.
“I watched the Samsung pre-Super Bowl ad that launched today. It’s pretty good and I can’t help but think these guys are feeling it (like an athlete that can’t miss because they are in a zone), while we struggle to nail a compelling brief on iPhone. That’s sad because we have much better products.”
While Apple produces more of its global campaigns in-house now, its relationship with TBWA/MAL is alive and well, proving the two can co-exist.
Adland has ruled the roost when it comes to managing clients’ advertising and marketing needs for quite some time.
Over the past few years, however, the traditional agency model has been shaken, turned upside-down, inside-out and flipped backwards. The rise of in-housing is one of those catalysts.
Some consumer goods company leaders have criticised ad agencies for being inefficient and are outsourcing less to them as a result.
In April this year, Procter & Gamble’s Chief Brand Officer Marc Pritchard said the company had saved US$1 billion in agency fees and production costs by doing more in-house.
“Too much work was outsourced. We let ourselves believe media was so technical and advanced [that] we couldn’t possibly handle it ourselves. No more,” Pritchard said in a speech at an Association of National Advertisers (ANA) conference.
Walmart, the world’s largest bricks and mortar retailer, earlier this year brought its website ad sales in-house, building the Walmart Media Group. Analysts estimate the spend involved could be as much as $US3 billion.
Walmart CEO Doug McMillon last year told analysts: “Our data has never been monetised, and we have a tiny ad business. It could be bigger.”
Verizon, Carlton & United Breweries’ (CUB) parent company Anheuser-Busch InBev and Pepsi are among other global brands to go in-house, trying to cut costs and become nimbler and more reactive in an increasingly fast-paced world.
Back at home, supermarket giants Coles and Woolworths, alongside David Jones, CUB, Optus, Commonwealth Bank and Sportsbet have also moved various elements of their advertising in-house.
Despite many similarities between the models, no two are exactly the same and most generally still involve some level of agency help – an important distinction.
Optus campaign created by Yes Agency
Trend or Reality?
While it may not be the demise of the agency, the increase in clients bringing certain capabilities internally is undeniable.
The Continued Rise of the In-House Agency report by the Association of National Advertisers (ANA) in the US revealed 78% of its members had somewhat of an in-house agency in 2018 compared to only 52% in 2013 when the survey was last done.
In addition, 90% of 2018 respondents said the workload of their in-house agency has increased in the past year, including 65% who said the workload has increased “a lot”.
This work isn’t limited to high-churn or production capabilities either – creative strategy, media strategy, social media, and programmatic media buying also saw significant growth in-house over the past five years.
“This report makes clear that the work being done by in-house agencies is no longer confined to ‘low-hanging fruit’ such as collateral or promotional materials and internal videos,” says Bob Liodice, CEO of the ANA.
“Traditional agencies are becoming increasingly challenged as marketers move more work in-house while encouraging their external agencies to provide differentiated services and increased value. We expect the current trends to continue, with accelerated client movement to in-house agencies.”
The World Federation of Advertisers (WFA) dismissed the “hysteria” around in-housing though with its State of Advertising report released earlier this year at the Cannes International Festival of Creativity.
Stephan Loerke, CEO of WFA, says the industry is often prone to overstating sweeping new trends.
“This [study] is a useful bellwether of what a lot of the world’s top brands really think,” he says.
“There is great optimism in terms of the perceived effectiveness of some direct response inventory but brands increasingly face the problems of clutter, ad blocking, declining reach and trust in advertising.
“There is also a stark reminder that, for all the talk of in-housing, our agency partners will remain critical partners in achieving brands’ goals.”
The report contradicts the ANA’s findings, instead revealing that brands were more likely to in-house things like low-cost "fast" creative executions, short-form content marketing and influencer marketing over the next 12 months.
Traditional media buying, “big ticket” creativity like TVCs and traditional media planning were more likely to be kept agency-side though, reverting back to Loerke’s point that agencies still have their place.
Adlander advice
As more clients continue to investigate whether or not they should bring pieces of the pie in-house, adland has sought to defend some of its strengths which may be taken for granted.
While some in the industry are looking to jump to the defence of agencies, others have acknowledged that not all will be lost.
MercerBell CEO Julie Dormand says agencies will still have their place but in-housing is still unavoidable.
“We cannot avoid this as a reality of the industry, in just the same way as we sit alongside other agencies on client rosters. The in-house is another partner agency in the mix,” she says.
“As marketing became more content driven and ‘always on’, clients saw in-housing as the ability to reduce cost and speed up execution. This is something that has changed the landscape for agencies and has created a new working model that I don’t see changing back, but being one that we need to adapt to.”
Even though clients’ internal teams know the business inside and out, Dormand says agencies can offer scale and breadth of experience and ideas – something that should be considered.
For a successful relationship between both parties, she believes drawing on these strengths, along with strong communication will bring the best results.
“We’ve found if this is missed, the messaging doesn’t match the broader communications. It really helps to have direct relationships with the in-house agency as well as the agency facing client marketers.”
Although he isn’t completely pro in-housing, GroupM CEO Mark Lollback says he doesn’t know why members of the industry are getting defensive about clients contemplating it.
“It is something that clients explore for various elements of the marketing and media capability, but there are probably about five advertisers in Australia with the scale and deep enough pockets to truly in-house significant parts of their marketing, media and programmatic operations,” Lollback says.
“I’m confident, and anyone running strong, effective and efficient agencies, should be too, that the holistic view of the market that comes from years of experience and expertise that sits inside agency networks offers enduring value to advertisers.”
He believes that elements such as data management platforms (DMP) or managing third-party data licences have the ability to be brought internally but urges clients to consider what their true objectives are before jumping into unknown territory.
“Even if you have a successful initial launch and program, over time your teams dedicated to media planning and activation may stagnate in isolation from innovation-focused agency environments where proximity to other teams and categories can inspire creativity,” he says.
“Recognise that in-housing isn’t a binary choice; there are many shades of implementation, and often agencies will support your objectives by shaping themselves to your business in new ways.”
Talent should also be considered, but Lollback notes it often isn’t. He believes that it may be hard to find the right person or people willing to work in such an environment.
“Talented operators and skilled programmatic people do not always want to work on one client or in a client organisation,” he says.
“They enjoy the variety of projects and problem solving and opportunities in agencies. So, by taking services in-house, often it’s the people who miss out on training, career opportunities, and learning from different clients’ needs and strategies.”
GroupM CEO Mark Lollback
Phil McDonald, Partner at full-service agency BCM, shares this view. Despite the operational efficiencies associated with in-housing, McDonald says it doesn’t always result in the best work.
“When marketers have executional teams on their payroll they can more tightly define what they need and how communication is executed. This makes perfect sense for high volume retail and on-line based brands,” he says.
“But an in-house team will only know what they know, they will live and breathe the category they operate in and will follow the norms of that brand and that category.”
He says working with a “quality” agency can provide a lot of value for brands, even if they have internal creative and digital execution specialists.
Strategic thinking and creativity underpin what agencies do. As long as agencies continue to deliver these two, McDonald says, clients will continue to see the value in working with an external partner.
“Rather than media and creative agencies somehow fighting the rise of in-housing we should embrace it and double down on providing our clients better, big picture strategic and creative thinking,” he says.
“We all know that if the strategic thinking and the creative idea aren’t right, you will be wasting money on producing and deploying the wrong executions. And it won’t matter how fast or efficient the production process has become, if it’s wrong it won’t be effective.”
Digitas Head of Media James Hudson is a strong advocate for educating clients. More and more, he says it is essential for brands to be participating in the process, but by the same token, they also need to understand what it is agencies do.
Taking them through the process from brief to finish has been something Hudson has done with a number of clients to ensure they are prepared and are across all the requirements.
He shares a story of one client who he has worked with and was looking to set up a DMP internally. Before doing so, Hudson reinforced the importance of having someone in the team who had the right skill set and knowledge – which goes back to Lollback’s point regarding a lack of thought surrounding talent.
“We said, before you do that, you need to make sure you have these specific skill set in-house so that person can either work with the technical teams to ensure it's going to be implemented in the right way, can work with the media agency to build a strategy for the marketing aspects of the DMP and they can also work with their own in-house CRM teams to actually make sure they’re using all of that data,” Hudson says.
“We actually wrote the job specs for them and gave them those job specs. I said unless you’ve got one of these roles in-house first of all, I would hold off signing a contract for any technology, otherwise you’re just going to be chasing the proof that you spent money on this technology rather than actually using that piece of technology.”
As well as the right skill set, he says it is important to educate clients on things like brand safety requirements and the necessity of entering the right information and data into programmatic campaigns.
“A brand will have to make sure they’ve got these same safety nets in place and those checks as well,” he warns.
“It isn’t as simple as just hiring two or three people, and giving them the systems and letting them get on with it. There are a lot of things that need to be done.”
The client case
Diving into the in-house world is something that requires a lot of planning and practice from brands to get it right. As Lollback notes, it isn’t a “binary” decision and there are a number of ways to approach it.
Known for its extensive agency roster, Optus formally launched its own in-house agency Yes in 2017. The telco worked with its branding agency Re to launch the internal creative shop but still works with several external creative and media agency partners too.
Optus Head of Consumer Marketing Melissa Hopkins says she worked with Re Managing Director Patrick Guerrera to get the model right but admits it didn’t happen overnight.
“I don’t think there are any cons [to the in-house model] because we’ve learned and we’ve made some mistakes,” Hopkins says.
“We’ve made some horrendous errors on the way but we’ve also had some really great outcomes. Every single person that is in there wants to be in there. They understand the model. They’re excited about being part of Optus and what we do.”
One of the criticisms of the in-house model is that it stifles creativity. However, Hopkins doesn’t think this is the case with Yes.
She says it was set up to ensure a variety of work was offered to the team beyond just production and high-volume projects.
The internal agency has been behind both television and radio spots for Optus, as well as helping to create out-of-home campaigns for the brand.
“The thing that we’ve built with Yes agency that I’m really proud of is that they look after all of our retail work end-to-end and do look after more of what I would call our trading based communications, but they additionally do have copywriters and art directors for other elements of creative that we require that goes out to market,” she says.
Re also helps to circulate people in and out of Yes from other M&C Saatchi Group agencies. Hopkins says this helps to maintain “freshness” and makes sure people aren’t being tied to just retail work.
Despite having it all up and running now, Hopkins acknowledges that some of the top creative talent won’t necessarily be knocking on Yes’ door for work. This is why she believes it is still important to work with external partners so that the telco has opportunities to engage a wide variety of creative talent and big ideas.
Former Initiative Managing Director Shaun Briggs jumped ship from the agency to join its client Specsavers in-house. In his new role as Head of Marketing Planning, Briggs says he works across more marketing challenges than just the media component that he was once only exposed to, but he still thinks agencies play a vital role for clients.
“The temptation or theory might be that in-housing will bring more control or that it will save money, but the reality could be very different if clients aren’t clear about what we need and what our expectations are,” he says.
Briggs believes clients have to be 100% sure that it’s the right move before they decide to do it all themselves.
Even with the benefits of getting to market faster and the cost-savings involved, agencies having independence from the client environment can bring diversity and out-of-the-box thinking to the table – which often leads to some of the best work.
“Of course, a client could theoretically in-house all of this, but pragmatically there are some things agencies should be better placed to deliver,” he says.
“From a media perspective alone, I don’t think many clients would have the scale to be able to fully replicate or maintain the market data and tools required, particularly given the rate at which they change.
“The way I think about it is that the more commoditised elements of what we require are more likely to be in-housed and sooner than more unique and specialised ones. Ultimately, I don’t think there is a one size fits all answer to this, it’s more a framework of considerations that will right size any plans to in-house.”
More us, less them
In a traditional model, the divide between agency and client has proven more often than not to be ineffective and time consuming. As consultancies began to move in and mark their territory in adland, the industry’s initial reaction was to feel threatened. Soon though, it began to recognise the benefits to their collaborative approach.
Working together, rather than in separate silos, has enabled some agencies to build bespoke and in-house units for clients.
This alternative appears to offer a happy medium for both agency and client.
TBWA and Apple’s MAL, Big Red and Coles, WPP and Bankwest’s Union, and 72andSunny and Google’s Anthem are some of many bespoke units being created by agencies to service and retain clients.
Jaimes Leggett, Group CEO of M&C Saatchi Australia, shares the same stance as some other industry colleagues that it isn’t a one size fits all solution.
M&C Saatchi Group has worked with a number of big clients now to create internal agencies but Leggett notes that there have been several models which his team have employed to make sure it is the right fit for the brand.
“What’s more important is what it is, who is in it, how it’s set up to work, what the culture is, what the behaviours are and what’s the resulting work,” he says.
“Most of our big clients, we’re now working on some bespoke models with.”
These include setting up Yes for Optus through the group’s branding arm Re, which Leggett says is a “true in-house style” agency; off-site models such as Greenhouse which M&C Saatchi and Woolworth co-created, and Countdown in New Zealand where both client and agency co-exist; and on-site models such as Commonwealth Bank’s 99 which exists within the agency.
Woolworths campaign created by Greenhouse
While proximity is a bonus, Leggett says this is not the driver to a successful in-house model. He boils the success to each of these variations down to two things – communication and collaboration.
“I think communication is really important because actually having people close together gives them the opportunity to chat more openly, more frequently throughout the process,” he says.
“The agency people are more involved and have a better understanding of the brief before the brief arrives because they’ve seen the genesis of it that helps to write the brief. So, they feel a collective sense of ownership over the brief.
“They’ve been able to have banter back and forth and, debate and discussion around it. Then, through the creative process, the agency is sharing work sooner and earlier and the client is going to help augment, support and grow, and do whatever to make the work better, so they feel a greater sense of investment in it and ownership of it.”
Independent agency CX Lavender has also recently launched an in-house offering for its clients like Westpac called CX Insitu. Linda O’Grady, CX Lavender Business and Data Strategy Partner, says the agency’s new service was born from a growing desire among clients to be more agile in order to get to market quicker.
“It took us quite a while to learn how to do it and to realise every company is different,” she says about setting up CX Insitu.
Like Leggett, she notes that one size does not fit all.
“Initially, we tried to design a model that we thought we could then deploy to various different clients. Whereas now it’s a little more fluid and we’ve got a base of how we do things, and then we iterate and adapt really quickly based on the client’s needs.”
In addition to finding the right model for clients, O’Grady says it was equally important to ensure it worked for staff as well.
She admits there were some reservations from both the leadership team and employees at first, but this led them to finding the right balance for all.
All CX Lavender staff begin and end their week in the agency with team meetings held on both Monday and Friday, as well as regular contact between in-house and senior members of staff within the agency. O’Grady says this was done to keep everyone connected and safeguard some quality control.
Achieving this balance for both client and staff wasn’t easy though. One of the hardest parts was managing client expectations on how it would work with CX Lavender’s team.
The agency wanted clients to know CX Insitu was not just about putting people onsite.
“I think for it to be successful, one of the things that’s really important is to have open-minded clients who are willing to think about it as a way of working, not just to lift and shift people,” she explains.
“It requires its own methodologies, QA, support systems and our people need to be able to explain and sell every step of our processes not just the work.”
Her final takeaway?
“There is no black box with in-housing. It won’t work without complete transparency and trust. It definitely won’t work without great communication and openness to continuous change.” 
Have something to say on this? Share your views in the comments section below. Or if you have a news story or tip-off, drop us a line at adnews@yaffa.com.au
Sign up to the AdNews newsletter, like us on Facebook or follow us on Twitter for breaking stories and campaigns throughout the day.