How Agencies Can Fend Off the Threat of Marketing Services Moving In-House
About five years ago, I sat at a bar with a guy I met at a conference who was a creative director at Grey Advertising. He looked into his beer and said, "If we're going to continue to make our money by charging clients $2,000 a pop for banner resizes, agencies are fucked."
The guy had a point. We're now seeing evidence that more and more brands are starting in-house creative teams. Of course they are. Over the past five years a number of factors have led to this inevitability:
- There has been massive financial pressure from a volatile economy. Corporations have responded to the financial crisis of 2008 by building up stockpiles of cash, deleveraging themselves and minimizing expenditure.
- Digital technology has institutionalized accountability and led to a relentless focus on marketing ROI.
- Digital media has dramatically increased the number of assets brands need to create. We used to shoot a TV spot and some print ads and we were done. Today, we need dozens (if not hundreds) of banners ads, web pages, web videos, apps, emails, Tweets, Facebook posts, Instagrams, Vines, Snap Chats, content, content, content—not to mention some sort of strategy behind each one of them.
The definition of the term "creative" has exploded. But in the process, some kinds of creative have become commoditized. If you think that what you really need is a kid who knows Photoshop, then go hire one. A commodity is something that is undifferentiated. Which is what we deliver if we squeeze our process down so that the value we deliver is simply based on low cost.
How much of a threat do in-house teams pose to agencies? I'd be lying if I said none.
Traction experienced this first-hand when our client Shutterfly took their digital marketing in-house a few years ago. I ran into my former client, Katelyn Watson, this week and asked her why they made that decision.
"There is so much day to day creative needed… social ads (multiple per day), affiliate ads, partner banners, copywriting," she said. "Most of these start with a brand voice and narrow in on a short term goal—a sale, promotion, seasonal need, and have a short shelf life. Hundreds of iterations and messages can be cranked out of the in-house machine. No agency can keep up with that cost efficiently nor should they want to own commoditized work."
Agencies provide great value, but that doesn't mean brands should forgo doing certain things in-house. There is no god-given law that says, "Thou shalt not use Photoshop without thine agency." Katelyn, now the VP-marketing at online financing company Kabbage, still uses agencies and has a clear point of view about where they provide value.
"Agencies and brands should work together on the groundbreaking, campaignable elements that make a brand memorable," she said. "Video, brand campaigns, the big stuff. Create it and then let go... teach the brand how to use what's been created. Then the legacy of the creative lives on, and you (the agency) can take credit for much more than a static 300x250."
Despite the rise of in-house agency resources, we should remember that most brands want to see their internal talent work alongside an agency, not in lieu of one.
Ryan Bonafacino, VP-digital strategy at Alex & Ani -- who is not a client -- discussed his view on this with me recently. "While I can't justify the cost of using an agency for every piece of e-commerce creative, what I really want is true partnership. I want the agency SEM expert and my SEM person to be locked at the hip. I want them to be best friends. I want my agency to be an extension of my team."
That's good news. But agencies still need to ask themselves a tough question. Are we providing value here? And importantly, are you articulating what your value is clearly? If you don't think so, chances are your clients don't either. Any business that makes money without delivering value is doomed to fail. Yours is no different.
It's important to remember too, that like all tides, this one will come in and go back out. Recently, we participated in a pitch for a major online retailer. They had started doing most of their digital marketing in-house a few years ago, but had come full circle and wanted to bring an agency in to do the work. They cited needs to be more strategic, have better creative, innovate more and improve their process.
The bottom line? Running a great agency -- whether it's a standalone shop or an internal one housed at a brand -- isn't easy.