Delivered June 1st, 2019. Contributors: Victor E., Varun N. and
Advertising Agency Reviews
There is no information in the public domain with insights into multinational brands with in-house advertising agencies that are most likely to put these agencies up for review in the next three months. However, our investigation revealed that some global corporations with in-house advertising agencies include Netflix, Sprint, Kellogg, Unilever, Procter & Gamble, Intel, Verizon, JP Morgan Chase, Booking.com, EA Sports, Verizon, and others. Unfortunately, these companies do not have any publicly available information indicating that they are likely to review their in-house agencies in the next three months.
Helpful Research Findings
Speaking at the Association of National Association, ANA, In-House Agency Conference in March 2019, executives from multinationals with in-house advertising agencies such as Bayer USA, Bank of America, Verizon, PwC, and others made comments about how to optimize in-house agencies, which could prompt other companies to review their in-house agencies.
In June 2018, 74% of multinational brands, in a survey by The Observatory International and World Federation of Advertisers, WFA, reported that they were reviewing their agency arrangements.
78% of members of the Association of National Advertisers observed that they had some form of in-house agency as of the association's latest study in October 2018.
As of November 2018, 64% of corporate America had some form of in-house advertising agencies, according to a study by Forrester and In-House Agency Forum.
Seven major multinational brands with in-house advertising agencies include Netflix, Sprint, Kellogg, Unilever, Proctor & Gamble, Intel, and StubHub, as per Winmo'report.
According to Business Insider's report in 2018, Booking.com, EA Sports, JP Morgan Chase, and Verizon operate with in-house advertising agencies.
A September 2018 report by the Association of National Advertisers showed that Verizon reviews its in-house agency biannually; however, the report did not reveal the time of the year when the company carries out the review.
We began by researching surveys and reports by global advertising associations with the hope of identifying recent studies by them with insights into multinational companies with in-house advertising agencies that are likely to review them in the next three months. For this, we investigated the domains of worldwide advertising associations such as the Association of National Advertisers, World Federation of Advertisers, and the In-House Agency Forum. Unfortunately, there was no study or report published by these directories with insights into multinationals with in-house advertising agencies that are likely to review them in the next three months. Instead, we located a survey conducted in 2018, which only highlighted that 74% of multinational brands planned to review their agency arrangements as of June 2018. Also, another 2018 study by Forrester highlighted that 78% of members of the Association of National Advertisers had some form of in-house agency. However, there was no information to show that any of the companies that make up these associations would review their in-house advertising agencies in the next three months, as none of these studies provided any info regarding the time of the year when companies usually review their in-house agencies.
Therefore, we proceeded to research trusted advertising and media websites hoping to identify reports of multinationals looking to review their in-house advertising agencies in the next three months. This time, we investigated news articles by Business Insider, Ad Age, Forbes, Ad Week, Marketing Dive, and others. From this investigation, we found reports listing companies that have in-house advertising agencies, but there was no info showing that they were likely to review their agencies in the next three months. Also, we located a report of the latest Association of National Advertisers conference held in March 2019 specific to in-house agencies; still, there was no information specific to organizations planning to review their in-house agencies. Instead, highlights of the conference were on measures multinationals could take to optimize their in-house advertising agencies.
Next, we researched the directories of companies identified from our research to have in-house advertising agencies with the hope of finding news articles, blogs, or press releases by them indicating that they were likely to review their in-house advertising agencies in the next three months. Companies reported to have in-house advertising agencies we researched include JP Morgan Chase, Verizon, Booking.com, EA Sports, Unilever, Netflix, Sprint, and others. Unfortunately, there was no report by these companies showing that they were likely to review their in-house advertising agencies. Also, we extended our investigation to media and advertising websites in search of any report showing when any of these multinationals review their in-house advertising agencies. This time, we could only find a report by the Association of National Advertisers, which observed that Verizon reviews its in-house agency biannually, but there was no info showing that they would do the same within the next three months.
Thus, based on our research, multinationals with in-house advertising agencies do not post information revealing when they plan to review their in-house advertising agencies in the public domain, as this is likely to be an internal matter. Hence, we could not determine those likely to review their in-house in the next three months. However, we provided some global companies with in-house advertising agencies as a proxy for the required information, as reaching out to them directly could be the only way to find out if they plan to review their in-house agencies in the next three months. For this, this report by Winmo provided a means of contacting the directors of the in-house advertising agencies of seven major multinationals.
In-House Capabilities vs Advertising Agencies
The benefits for brands that are shifting work to in-house agencies are cost, speed, a better understanding of the brand and business, consistent messaging across touchpoints, transparency, and better collaboration. Most of the digital marketing work is done by in-house agencies and many specialty marketing functions have also been moved to in-house agencies in the past three years.
The number of brands with in-house agencies increased from 42% in 2008 to 64% in 2018. A decade ago, owing to recessionary pressures, the key benefit that brands saw in having in-house agencies was cost. Even today, though there are no economic pressures, cost efficiency is still relevant as there is a need to produce digital creative work quickly.
A survey of 325 companies conducted by the In-house Agency Forum in 2018 found that 25% of the companies believed the greatest advantage of having an in-house agency was that the internal agency had "knowledge of the brand", while 20% believed the greatest advantage was that the internal agency had "knowledge of the business".
Based on a panel discussion (hosted by Econsultancy and U Associates) of four industry experts, the main benefits of having an in-house marketing team are that the in-house team understands the brand and culture, it is fast and easy to communicate with them, information can be shared with the team while complying with stringent data governance rules, and aligning the agency with constantly evolving marketing strategies becomes easier.
ANA's 2018 survey found that 70% of agencies had moved important creative work in-house. The key reasons for using an in-house team were shrinking ad budgets, intimate marketing methods like content and social, and accessibility to data.
Verizon, Unilever, and Intel concur that advertising needs to be simpler, faster, and more collaborative in a digital world.
SERVICES handled by IN-HOUSE and EXTERNAL AGENCIES
According to an ANA survey, the key services handled by in-house agencies in the United States are creative (76% of respondents), brand or corporate platform (52%), marketing/ product (51%), media (36%), sales/ channel (27%), programmatic (24%). Correspondingly, external agencies handle most of the programmatic and delivery or media planning/buying-related functions.
Creative services related to traditional media like collateral/ promotional material and videos for internal use; creative services for digital media like email and social media; media planning/ buying services for social media and SEO; and specialty services like content marketing are most commonly handled by in-house agencies.
In the last three years, 70% of ANA members who were surveyed moved specialty services work like content marketing, social media, and influencer marketing in-house. Sixty percent of content marketing work, 44% of influencer marketing, and 40% of data analytics were shifted in-house during the last three years.
Other specialty services like experiential marketing (26%) and commercial production (23%) have also been moving in-house.
The percentage of companies handling content marketing work increased from 34% in 2013 to 75% in 2018.
Brand identity-related work, social media, mobile display, programmatic, and media planning/buying for social media are being moved from external agencies to internal agencies.
The top perceived benefit of moving traditional-media-creative services in-house is creative expertise, while for digital media it is the speed and nimbleness, and for media planning/ buying it is cost efficiency.
"There is a higher incidence of in-house departments for content creation and social media". In the case of internal agencies of large corporates, media is also a focus area.
A trend of shifting programmatic to in-house has begun in the last five years. Twenty-six percent of programmatic buying shifted to external agencies in the last three years.
EXAMPLES OF BRAND THAT HAVE IN-HOUSE AGENCIES
Warren Chase, who manages 140, Verizon's in-house agency, believes that it is all about "proximity" to the brand. According to him, the in-house agency enables Verizon to "stitch everything together and make sure the brand narrative was consistent across all the different touchpoints".
Chase thinks that its in-house team has "proximity to insights", which enables the company to inform or pass on data to its creative team, and "proximity to leadership", which increases the chances of a creative idea being executed.
Verizon now has 18 agency partners compared to 46 a few years ago. Chase admitted it was chaotic and "out of control".
Similarly, Unilever North America used to work with at least 1,500 agencies, which it has consolidated over time.
Theresa McDonnell of Unilever believes that the company needs to be faster and more agile in order to create a higher volume of short format and mobile content.
In 2018, Unilever (globally) moved some of its marketing activities to its internal team and saved $562 million.
Barclays' internal agency handles 85% of its creative work and does it 60% faster than the external agency they used to work with at a lesser cost.
Richard Atkinson, VP of Barclays' advertising division, says that “the benefit of having an on-site team is that you have them truly immersed in your business, but the risk there is that they don’t have enough time to draw on external inspiration." He also sees collaboration as a key benefit of having an in-house team.
Barclays relies on external agencies for things such as campaign delivery, strategic planning, media, and technology.
HOW BRANDS SEE POTENTIAL (AND HURDLES) OF WORKING TOGETHER
Bill Duggan, VP of ANA, attributes the shift to the internal agency model to the lack of "trust" in external teams and poor "media transparency". A survey found that 87% of companies were concerned with the level of transparency of external agencies. The recent emphasis on GDPR, personalization, privacy, and data access requires greater transparency between agencies and brands.
In-house agencies are more cost-effective to work with as they are not chasing profits. "We’re not trying to make money in the operation,” said Jarrett King, who manages Coca Cola's internal agency. Unlike an external agency, in-house agencies are not profit centers, and therefore, are only looking to break even on expenses.
“I’m salaried and bonused based on the success of work I’m actually doing for the business,” said Roger Hyde, who manages the in-house agency at AT&T. It is difficult to negotiate a performance-based bonus with external agencies.
Bayer managed to reduce its programmatic buying cost by $10 million within the first six weeks of moving the function in-house. "It is really hard to provide a significant amount of value in an agency today in a programmatic biddable medium", said Paul Gelb, who heads programmatic at Bayer. In-house programmatic buying also allows more control over campaigns.
Unilever's external agency partner Mindshare also works on-site with Unilever's on-site agency, U Studios. "It’s very important that media and creative are coming closer together and we’re talking more and more, every single day, about how we improve on that", said McDonnell.
Relationships with external agencies are still very valuable as Unilever has 66 brands in America and every brand has individual requirements. Some of its external agencies work near the site and in global production hubs. U Studio, Unilever's on-site agency is run by an external shop (Oliver).
However, Theresa McDonnell of U Studios, Unilever North America, believes that Unilever's increased focus on quality has come at the expense of creativity.
"We are part of the biannual agency review pipeline that includes all other agency partners. We're measured in terms of creative excellence, strategic leadership, talent retention, etc. That keeps us in check."