Last fall, the Association of National Advertisers in the U.S. released headline-grabbing survey results revealing that 78% of its members had taken some agency work in-house, with cost the most frequently cited reason for doing so.
Asked about the primary benefits to having an in-house agency, 38% said cost efficiencies, 19% said better knowledge of brands, and just 12% said speed and nimbleness. Only 6% cited greater control.
But at a Canadian industry event focused on in-housing in Toronto this week, attendees heard a very different story about both the prevalence and benefits of taking agency work in-house.
“I would just say proceed with caution if [cost] is your objective. There is a big up front investment required from a technology standpoint,” said Lauren Felix, senior manager, media and digital strategy for Bayer Consumer Health, which announced last year it would take its media in-house by 2020. “This was all about control, transparency, improved performance [and] becoming more efficient. It was not about cost savings initially.”
Felix was one of the presenters at the event hosted by the Association of Canadian Advertisers.
In-housing has become a popular industry topic for a number of reasons: marketer concern about lack of transparency, the rise in biddable media and automated buying, pressures to control costs and improvements in technology all contribute.
However the practice became a much bigger story last year when the ANA numbers came out revealing just how quickly it was catching on with marketers: just 42% reported having in-house services in 2008 and 58% in 2013.
However, a small survey conducted by the ACA revealed that the trend is not nearly as pronounced in Canada. Kicking off the event, ACA president Ron Lund revealed that just 40% of 43 ACA respondents have some form of in-house agency (48% in English Canada and just 17% in Quebec).
In terms of the types of services being taken in-house, there is a very wide range, said Lund. Most frequently cited are activities that can require real-time attention, such as social media, internal corporate communications, promotional materials, search engine marketing and data marketing and analytics.
At the other end of the spectrum, Canadian marketers have been least likely to in-house traditional media services like TV advertising.
Interestingly, said Lund, while programmatic is one of the most commonly discussed areas when it comes to in-housing, just four of the 43 Canadian respondents said they have taken it in-house.
Lund was followed by Felix and Tessa Ohlendorf, managing director of in-house consulting specialist MightyHive, which has been working with Bayer.
One of the reasons for the increased interest in in-housing was the consolidation in martech and improvements in the technologies themselves, said Ohlendorf. That is making it easier for all marketers—no matter their technical acumen—to navigate the space and to extract real, useful insights with in-house teams. “This is a very different space we are at,” she said. “The technology has evolved to a point where it is very user friendly.”
Bayer moved toward in-housing because its senior leadership team felt it would allow them to make its digital capabilities a competitive advantage, said Felix. “Cost savings can be an outcome that comes in the long term, but it’s not the place you want to start.”
If you are looking at in-housing to cut costs, it could lead to decisions based only on cost and not long-term strategy, added Ohlendorf. “The kinds of choices you are going to make are going to be motivated by price, and that is not enough,” she said.
Costs and benefits was also a topic in a panel discussion with Felix, Zhen Jiwa, vice-president of digital commerce at CIBC and Maryann Rusnak, senior media manager at Expedia.
“I think the value realization of moving things in-house takes shape over time,” said Jiwa. In the short term, metrics like CPA could actually look worse, he said. “I think CPA quite frankly is a horrible metric… I don’t think [it is] a true measure of was your in housing successful.”
Instead, the focus has to be on other, “softer” metrics like the types of clients, the length and strength of the client relationships. “There is no model that says transitioning in-house is cheaper. It needs to be on agility and speed, there are fewer mistakes,” he said. “I think that is the value. It is all about, ‘Are we getting smarter about the type of people we are acquiring.’”