New report cites skyrocketing growth of internal agencies

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JC Penney's internal agency handled its recent Shaq campaign.
JC Penney's internal agency handled its recent Shaq campaign. Credit: JC Penney

In news that's surprising to no one, in-house agencies are on the rise. What is new, however, is just how much. The vast majority, or 78 percent, of members of the Association of National Advertisers have some form of in-house agency, according to a new report by the group, which surveyed 412 client-side marketers. And many of those marketers who don't already have internal agencies are considering the strategy—of the 22 percent minority, eight percent said they are thinking about opening an in-house group.

It's a sharp upward swing from the ANA's most recent report on the topic, published in 2013, which found the numbers to be more evenly divided. At that time, just 58 percent of 203 marketers reported an in-house team.

Bob Liodice, chief executive of the ANA, expects the trend to continue to accelerate. "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," he said in a statement.

Liodice says the work is no longer limited to "low-hanging fruit," such as promotional materials, or internal videos. Indeed, 76 percent of the in-house agencies handle creative work for brands, and 24 percent handle programmatic media buying, for example.

While some marketers such as Intel and Progressive have long had successful internal agencies, others, like Verizon, which opened an in-house agency last year, are new to the strategy.

SoulCycle has also been expanding its internal capabilities with the hire of a creative director last year, bringing in Roxana Zegan, whose resume includes stints at fashion brand Coach and creative agency Droga5. The ANA report lists cost savings as one of the top benefits of in-house agenices. That is leading some marketers to move some functions in-house, even as they hire new shops.

Last week, amid the news that it had awarded lead creative duties to BBDO, Ford said it will expand its in-house marketing with 100 new positions dedicated to brand design, media tools, technologies and customer experience. That's a big shift for the automaker, which had traditionally outsourced major marketing duties to WPP, which is remaining on Ford's roster. Earlier this year, JC Penney awarded its creative business to Badger & Winters from McGarryBowen. While the retailer's new agency is responsible for the overall brand platform, recent campaigns, such as a spring effort with Shaquille O'Neal, have been produced internally.

Marketers credit internal agencies with maintaining brand consistency and allowing for better control. Andrew McKechnie, chief creative officer at Verizon, said in a statement that the brand's new agency helps "connect the dots when we think about our brand narrative and brand experience."

Agency executives, which of course have a vested interest against marketers taking duties in-house, say that doing everything internally will stunt creative growth, particularly from outside thinkers who add a new level of perspective to a marketing campaign. Also, many marketers have struggled to find a balance, agency execs say.

"There's a lot of push and pull," Luis Montero, president of The Community recently told Ad Age about the topic. "They bring creative in-house, then they push it back out to agencies again. It feels like it isn't strategic as much as it is cost-conscious."

A spokeswoman from the American Association of Advertising Agencies declined to comment until she was able to view the report, which publishes Monday.

Contributing: Meg Graham

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