- The in-housing trend in advertising has sped up in the pandemic, with some brands doing more of their ad-buying and creative production in-house.
- With the economy in disarray, marketers have been turning to their internal agencies as they scramble to remain visible to consumers and maintain more control over their customer data and messaging while preserving capital.
- In-house agencies are not only taking on more responsibilities but getting more efficient and sophisticated in the process.
When COVID-19 started spreading throughout the world, Anheuser-Busch's in-house agency, Draftline, went to work.
The agency began monitoring its social media to quickly shift its marketing to a message that was suited to the pandemic, producing more than 500 digital ads in the first week alone.
"The past several months have highlighted the need to bring some creative and analytics in-house – something that's incredibly useful when quick pivots are needed," Spencer Gordon, VP of digital at Anheuser-Busch told Business Insider. "This has resulted in a much more agile marketing process, and rapidly increased the total creative output that we need."
Anheuser-Busch is not the only one. A number of brands have been doing more of their ad-buying and creative production capabilities in-house over the past few years — a trend that's sped up amid the pandemic.
According to an Association of National Advertisers (ANA) member survey, 92% of 196 respondents adjusted their creative messaging after the World Health Organization declared COVID-19 a pandemic in March, and 55% said they relied on their in-house agencies to adjust their campaigns since March. Forty-two percent cited another "internal team," while only 26% said an "external agency."
With the economy in disarray, marketers have been scrambling to remain visible while preserving capital. They also want more control over their customer data and messaging, making their agencies more dispensable than ever.
More brands are setting up in-house agencies
Companies such as Oliver and MightyHive, which help brands set up in-housing operations, said incoming requests have increased since the pandemic started. Pete Kim, MightyHive's CEO, said it's already had as many conversations with marketers about in-housing this year as it did in all of 2019.
Read More: Meet 20 firms helping big brands like Sprint and Unilever take their advertising in-house
The pandemic has accelerated the speed at which companies need to get their message out, said Andrew McKechnie, SVP and chief creative officer of Verizon. He said that the 175-person agency enabled Verizon to quickly update the creative to ensure a uniform message across all its channels.
"It would be difficult to do that if our core channels were fragmented with different agencies," he said. "It made my job of communicating clearly to our customers a lot more efficient."
In-housing has also picked up as the pandemic has led many brands to cut back their already-squeezed budgets, said Oliver CEO Simon Martin.
"Every single client today is focused on leveraging existing assets, whether it's refreshing, repurposing or creating content without big shoots," he said. "In-house agencies have great access to those assets and can move fast on them."
Draftline has helped Anheuser-Busch keep up with the creative work demanded by the company's huge volume of brands in its portfolio and growing media channels they advertise on, said Gordon.
"There has been an exponential increase in the amount of creative work needed to sustain the business," he said. "In-housing has helped us keep up with the increases."
In-house agencies are getting more sophisticated
More than 78% of ANA members reported having some form of an in-house agency in 2018, and continue to bring more aspects of their marketing in-house. Verizon also has teams focused on customer experience and media and activation in-house, McKechnie said. Procter & Gamble has built up its media functions in-house and recently bypassed its agencies to commit ad dollars in this year's upfronts.
Some in-house agencies have been taking on more responsibilities and getting more efficient and sophisticated.
According to an ANA case study, Cisco's in-house agency The Hatch is expected to produce 70% of its creative work this year, up from 20% in 2017.
Read more: P&G is taking more of its ad buying in-house in a loss for advertising giant Omnicom
Some marketers have said doing advertising work in-house is more efficient. Aflac has saved upwards of $16 million in agency fees with its agency; Hershey claims to have saved $4 million in agency fees; and Sprint has saved $6 million in agency costs annually, according to MightyHive, which has Sprint as a client.
Internal agencies have also gotten more specialized over time, according to the ANA, handling everything from SEO and influencer marketing to marketing analytics and programmatic strategy as well as media, creative, and data duties.
Draftline has combined creative with data and analytics to produce localized campaigns and personalized ones at scale, said Anheuser Busch's Gordon. In a mark of its success, the agency is opening its first regional office in Miami, he said during a Digiday+ webinar in May.
More in-housing means more bad news for ad agencies
Brands turning to in-housing is more bad news for ad agencies, who are already reeling from clients slashing their budgets amid the pandemic. And the biggest reasons for companies doing more work internally — the ability to change campaigns fast and at lower cost — are more prominent than ever.
"It was no secret that the agency holding company model had its challenges, and the pandemic has certainly exacerbated those challenges," said MightyHive's Kim.
Agencies for their part insist there's still a place for their work, though. Ad agencies — especially smaller independent shops who adapt to a project or consultation-based model — will see a comeback when the dust settles post pandemic, said Barry Lowenthal, CEO of The Media Kitchen.
"The agency business will look very different in that agencies are not going to make money on buying tonnage anymore or coming up with giant campaigns that run all year," he said. "But there will always be clients who are entrepreneurial and need help with paving the path forward."
Brands including Anheuser-Busch also continue to use agencies for several functions like strategy, creative and TV spots. Plus, internal agencies themselves have funding constraints. Over half of respondents in a recent study by the trade association In-House Agency Forum said they weren't adequately funded.
"We're repurposing dollars the way that we would need to to make sure that we can exist and be supportive, but it has not interrupted or interfered with our agency fees or our production dollars," said Anheuser Busch's Gordon.
Still, even if in-house teams continue to work in conjunction with agencies, there is no denying that the percentage of work is rising for in-house agencies and declining for external agencies, said the ANA's Group EVP Bill Duggan.