Michael Lee: is social media driving the spectacular growth of in-house ad agencies?

Unknown-2Michael Lee is a former ECD of Euro RSCG New York handling Volvo Worldwide. Born in England, he spent 20 years working on integrated accounts including Intel, JP Morgan, ExxonMobil and Jaguar. In 2012 he set up agency search consultancy Madam.

The Association of National Advertisers in the US recently released a report on the growth of clients building in-house marketing capabilities. And it has some remarkable numbers. Nearly 60% of clients are using in-house capabilities in 2013, up from 42% in 2008.

But the numbers get scarier for agencies: 56% of clients with in-house capabilities have moved inside assignments that were handled by an external agency.

And scariest of all: 40% of those clients brought creative strategy in-house. Historically, this has been a key agency capability and attraction to clients.

Agencies, pause for a deep breath here. So what’s triggering this? What’s encouraging American Express, Gap, Wells Fargo, Target and others to expand their do-it-yourself marketing?

Well, the ANA cites the reduction of marketing budgets, the speed, security and efficiency it offers, and the encouragement from procurement to build their own capabilities.

But those reasons have been around for a while. So there must be something new triggering this.

In-house used to mean brochures, flyers, retail ads and promos. Nothing too fancy. But the emergence and the impact on brands of Facebook, Twitter, Pinterest and Vine is fundamentally changing that. Clients started out by building their own capabilities in the new social arenas, putting their toe cautiously in the water and building from there. Now, 69% of companies run social marketing from in-house, with only 7% exclusively using an outside agency.

So perhaps the practice of successfully running social platforms within the company has provided clients with the confidence to spread their wings and bring more capabilities inside?

I thought I’d test this theory and speak with a client or two who have strong in-house capabilities.

First-off, one preferred to call it “in-sourcing.”

“In-sourcing….means bringing in best-in-class people sitting right next to us; we give them the right technology and resource. One full-time FTE (full-time equivalent) inside is better than having a third of an FTE outside at three places.”

OK, makes sense, but back to my question:

“I wouldn’t say that growth of in-sourcing is driven by social…it’s still mostly an efficiency and speed play……but social is driving a re-think and enables the conversation of reinvention to start.”

So what is it? Why is it growing?

One client continued, “I do think that in-sourcing is a trend that is highly growth oriented. Maintaining the overhead of six different agencies isn’t going to work going forward.…and there’s a type of person who likes to manage the total output of a brand…. not just the ads. Ad agencies are not controlling the majority of the channels anymore…just a fraction of them.”

Bingo. That’s it: Power. Influence. Control. The eternal Corporate Aphrodisiacs.

Working right at the heart of a brand gives you the whole picture, the real 360 view, the ability to influence a brand early with your ideas, and more important, the ability to protect them.

But if we build it, will the talent come? How good can an in-house agency really be, could it ever become great?

A lot of that depends on the quality of talent it attracts.

Well, certainly more and more very experienced and talented agency people are taking the leap over to the client side.

Jonathan Mildenhall at Coke. Esther Lee at AT&T. Dana Anderson at Mondelez and very recently Ann Bologna joining TripAdvisor have all made the move.

One client offered this perspective “They’ve made the move because they want to stop making recommendations and start making decisions. The agency seat at the table is getting smaller and smaller”.

But there are challenges, back to the ANA report:

Staying ahead of trends appears to be more difficult when relying on in-house capability….and the big one: concerns about creative innovation (or the lack of it) which rose to 43% from 34%.

Creative innovation

Can in-house deliver it going forward? Can it appeal to and attract top creative and strategy talent? If in-house is going to continue its growth and impact it’s going to need to do a far better job at that than it has to date.

99f275ec31Well I doubt they’re going to get the likes of Ted Royer or Susan Hoffman but I thought I’d have a chat with someone who connects daily with some of the top creative talent in the country: Anne-Marie Marcus (left), CEO of creative recruitment firm Marcus St. Jean in NYC and get her thoughts.

“Really good creative people want to be in a creative environment. They have a fear of not being part of that type of environment. Apple, Target, Facebook and Google have got that creative reputation but few others do.”

“And they want to work for a great creative director.” In-house doesn’t offer that, apart from Apple and the fashion brands: who wouldn’t want to work for Jony Ive at Apple?

But here’s a very interesting comment from Ann Marie, “In-house appears low on aspirations. They don’t have desire to win a Grand Prix at Cannes…a gold at The Clios…or winning new business. Creative people thrive on pressure and competition. “

Aspirations of doing great work and displaying that publicly in award shows is a huge motivator for agencies, and it sounds like in-house needs to get a piece of that.

One client had a slightly different thought: “a powerful brand is a powerful brand. Talent wants to work on and influence those brands.”

So, back to my question, can an in-house agency ever be great?

Maybe, if it instills some ambitious aspirations and goals, like winning a Grand Prix or two. And why not? After all, who is in a better position to do so than a team embedded into the heart of a brand?

Go out and attract some great talent, give that talent a decent rein and responsibility, and the ability to attract others. It’s no different than building a great agency really.

Bon chance. And looking forward to applauding the first in-house team to win a Grand Prix.

Let the games begin.

This post first appeared in Forbes.



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