The Rise of In-Housing

The Rise of In-Housing

By William A. Lederer, Chairman and CEO, iSOCRATES

In-housing bringing your media and marketing efforts in-house as opposed to outsourcing them has been on the rise recently. This has been especially true in the realm of MADTech marketing where, a few years ago, a number of prominent marketers accused agencies and tech partners of unscrupulous MADTech marketing practices and wasted spend, prompting an FBI investigation.

MADTech marketing accounts for more than 80% of the digital ad spend nationally. Yet, a study by Advertiser Perceptions reported that advertisers with MADTech budgets over $20 million estimated that a staggering 37% of that ad spend is wasted.

It’s not a big surprise then that two out of three marketers plan to bring their MADTech efforts in-house by 2022. Many factors have contributed to this shift, but it has been largely influenced by three key events:

1. In 2016, The Association of National Advertisers (ANA) commissioned a report, performed by K2 Intelligence, that revealed widespread use by agencies of sketchy “black box” media-buying practices such as accepting rebates from media vendors and not passing the savings on to clients.
2. In January 2017, the Chief Brand Officer for Procter & Gamble, Marc Pritchard, gave a scathing and widely publicized speech at the Interactive Advertising Bureau’s (IAB) Annual Leadership Meeting, warning companies that the activities of many agencies’ and technology partners’ were “murky, non-transparent and even fraudulent.”
3. Finally, another likely driver of the shift is Bayer, which decided in 2018 it was going to move their MADTech initiative entirely in-house. According to Paul Gelb, head of MADTech and social at Bayer, the move saved the organization a whopping $10 million in MADTech buying costs within the first six weeks. That savings caused a lot of businesses to take notice.

Bayer’s in-housing initiative has proved so successful that they have decided to move all their digital media buying, MADTech, search and digital analytics in-house by 2020.

Challenges of In-Housing

Unfortunately, once businesses attempt to create their own in-house agencies, they often find that their teams are overwhelmed or that it is difficult to recruit the specialists necessary to navigate today’s technical and complex marketing environment.

A recent ANA study found that the biggest challenges businesses faced when starting an in-house agency were managing workflow, scaling efficiently and managing resources.

In-house agencies are notoriously difficult to build from the ground up. Start-up costs can be prohibitive, and you need a high level of internal commitment.

Talent engagement and acquisition is also a huge issue especially in the relatively new specialty of MADTech marketing where there are simply not enough experts to go around. Beyond the scarcity, it is difficult to lure specialists who, typically, have worked in agencies (often in big cities) and may view working in-house as less exciting and offering fewer opportunities for growth.

In a MediaPost commentary on the unintended consequences of moving marketing in-house, Maarten Albarda wrote, “Marketers are often driven by the promise of lower cost in general and better/faster execution under their own control. And while that might be true for some, many marketers are finding that the grass is often not much greener on their own side vs. on the agency side. What they hadn’t realized is that these decisions have far-reaching consequences across the wider enterprise that impact working methods, required internal and external support structures, capital investment, HR policies, IT investment and talent.”

For a more in-depth exploration of your sourcing options, download our whitepaper, The iSOCRATES Guide to MADTech Media and Marketing Services Sourcing.

In-housing all of your media and marketing operations ultimately may not be the best choice for your organization. Want to discuss your other sourcing options? We’d love to help. Contact us.