Taking Media In-House Is not a Case of One Size Fits All

As experience shows, the realities are not so black and white

The difficulties of in-housing have led some to perform a U-turn on their initial ambitions. - Credit by Getty Images
Headshot of Ronan Shields

Key Insights

Sometimes it is better to take back control, while other times it’s better to leave it in the hands of experts.

Since the dawn of paid-for search advertising–a means of advertising that requires more data-led savvy as opposed to bulk-buying power of traditional media agencies–the in-housing narrative has gone to and fro.

In-housing, where a brand takes media-buying responsibilities out of the hands of its media agency, is not a new phenomenon. But in light of the controversial K2 Intelligence report for the Association of National Advertisers in 2016, which challenged the traditional agency-client relationship and probed transparency in media-buying practices, the advent of automated trading piqued the interest of marketing procurement professionals.

Many brands have been eager to trumpet the success of their in-housing operations. However, for every account of double-digit savings with such efforts, there are as many anecdotes of U-turns. Simply put, operating a digital media-buying unit is hard, and marketers should think carefully before taking it under their roof.

Decline in trust

Brands that have bought into the in-housing craze include EA, Netflix, Procter & Gamble and Target.

Rob Webster, co-founder of Canton Marketing Solutions and long-time former GroupM executive, explained that marketers’ attitudes to in-housing have changed over the last 20 years.

Per Webster, during the mid-2000s, advertisers started giving out a lot of paid search and SEO to independent agencies, but around 2010, the big agencies started to buy independents outfit. This consolidated a lot of power into the hands of the Madison Avenue stalwarts. The faith that advertisers placed in agencies was, at that point, at an all-time high, but questions around transparency soon emerged.

“What went wrong from there was the ANA report and from there a lot of trust broke down,” Webster added. “But at that time, a lot of advertisers had nowhere else to go, as a lot of the independents were just too weak to run media globally.”

Since then, a multitude of boutique operations plus platform specialists such as Mightyhive, an outfit recently acquired by Martin Sorrell-owned S4 Capital, have helped spur an uptick of the in-housing trend.

Efficiencies, but not just about pricing

A 2018 ANA study claimed 36% of its membership uses an in-house agency to execute media activity–up from 22% five years earlier–with 24% using such a team to run their programmatic advertising. This is how fads work: One person does it, then another, then another. For some like EA, it has been the most appropriate decision.

Since the mid-2010s, EA has taken a large amount of its digital media buying operations in-house. Belinda Smith, EA’s head of global marketing intelligence, earlier explained how the decision was actually governed by data security concerns as much as it was by cost-control.

More recently, Smith said the video gaming giant took all its digital media buying in-house in the last two years, including programmatic, search and social as a way to be better, stronger, faster.

“What we got excited about was building a more responsive media-muscle that could capitalize on trends … in near real-time or at least faster than it would be if we didn’t have those capabilities all sitting inside,” she said.

EA’s Head of Global Marketing Intelligence, Belinda J. Smith speaking at Adweek Nextech 2019 conference
Belinda Smith, EA's head of global marketing intelligence

Not everyone can be as nimble as EA. Take one of the largest CPG companies on the planet, for example, P&G, whose chief brand officer Marc Pritchard recently claimed that 30% of its media spend was now planned in-house, with much of these efforts geared toward reducing waste.

The company did not respond to Adweek’s request for comment by press time, but a transcript of Pritchard’s presentation at a Morgan Stanley Global Consumer and Retail Conference on Dec. 3 emphasizes Pritchard’s quest for efficiencies, particularly his desire to reduce overexposure to ads.

“The excess frequencies that I spoke about is one of the biggest scourges in the industry,” he had said.

When P&G makes a decision, the industry pays very close attention. In-housing is no different.

Making digital’s dark side gets more transparent

Earlier this year, Pritchard spoke of his displeasure of the media supply chain, telling ANA Media Conference attendees that the “dark side” of the digital sector continues to operate, if not worsen.

Among the top concerns are the huge margins that could be made by arbitraging media, concerns that date back to the early days of digital media. This was the lifeblood of the agency trading desks of the early 2010s, but suspicions over their models have seen ATD fall out of favor. The middleman gunks up the works.

A recent ANA survey found 40% of marketers frowned upon their media agencies arbitraging inventory, and now many ATDs are keen to trumpet their transparency.

Victims of their own cost-cutting

However, some are quick to point out that onerous payment terms insisted upon by brands that effectively write the first check, which is then subdivided throughout the supply chain are one of the many root causes of such chicanery.

Agency holding groups often bark at how clients demand punishing payment terms, even noting that several clients have been known to ask for net payment terms of anywhere between 120 and 150 days.

This can lead to a culture of rebates, a willingness to turn a blind eye to endemic ad fraud. Indeed, some of the industry’s most high-profile transparency initiatives have fallen victim to holding groups resistant to change. Many express a climate of hidden fees and common kickbacks.

Matt Prohaska, principal and CEO at Prohaska Consulting, said, “A lot of the tech and data fees have started to have been slowly rolled back, but the reality is that when you have major brands asking for net-120 days it can be hard to run a business. … Hopefully, as the pendulum swings back you can find a middle ground.”

Meanwhile, one agency source who asked for anonymity due to the sensitive nature of the topic, said that oftentimes brands will use the in-housing narrative simply as a negotiating tactic.

“In some of the pitches I’ve been involved in recently, many clients state they want to in-house because it instantaneously puts the agency on the back foot in terms of negotiation capability,” said the source.

This inevitably leads to agencies agreeing to work for lower fees, and from there, many had to get pragmatic in how they generate value resulting in a culture of discounted buying and rebates.

The rise of the in-housing consultancy

As such, many of the traditional holding groups have introduced consultancy services. Upon first inspection, it might seem they’re acting against their own self-interest.

Although, according to Martin Kelly, the chief executive of Infectious Media, this is a conflicted model. The independent digital media agency created an in-housing consultancy earlier this year.

“Brands that want to in-house make it really clear that they do not want to work with anyone who’s got skin in the game when it comes to their media-buying,” he said. “Therefore, when I see the holding groups launch in-housing consultancies, I can’t see how they are going to get traction because impartiality is so important.”

According to Webster, certain agency holding groups are more prepared for the in-housing trend than others. He highlighted Dentsu’s Merkle plus Omnicom Media Group’s Hearts and Science as examples of well-position operations to transition to the new realities of the marketing paradigm.

Things don’t always go to plan

Cosmetics giant Coty, maker of brands like Cover Girl, Adidas and Gucci fragrances, attempted an in-housing initiative in 2015 when it picked up Beamly. This included transferring its media buying operations to Zenith, the cosmetic giant’s global media buying agency.

It was fine—until it wasn’t. Under Coty’s ownership, Beamly would effectively act as an internal agency that would have to pitch alongside third-party service providers, but varying qualities of service meant that relationships between the digital specialist and its owner were not always smooth. Earlier this year, the company made a U-turn when it shuttered the unit.

Brands that have considerably scaled down their in-housing initial ambitions include Intel and Vodafone. They’ve all reported similar experiences.

Brian Dolan, CEO of WorkReduce, said that “just like every trend in ad tech, it’s been subject to a hype-cycle throughout the last few years, and now we’re going through the same troth of disillusionment that we’ve seen with DMPs, PMPs, etc.”

Danny Hopwood, president of OMG, EMEA, acknowledged in-housing was a trend that was sometimes requested for the wrong reasons.

“When it’s done for the right kind of reasons, it’s for the right type of advertisers that want to get much closer to the media buying, planning and analytics elements of what we offer,” he noted. “Where we are probably seeing it fail is when things move too fast and the client-side teams are not equipped or have an understanding of what it is they’re actually taking on.”

Infectious Media’s Kelly agrees, adding in-housing is at least “a two-year endeavor.”

Talent issues abound

Dolan pointed out that many marketing departments inside brands simply don’t want to spend their time analyzing data sets. Several sources told Adweek that sourcing the talent necessary to handle such an operation is a particular stumbling block.

In July, the ANA published a report suggesting in-house operations struggle to attract top-tier talent. Experts say that some talent are attracted to the variable model of agencies and not just working with a single brand as in-house operations do. Cue industry cliche: You go client-side to die.

Prohaska highlighted how the geographical location of any in-housing movement can play a significant role in the success or failure of any time a brand wants to go down that path. Talent goes to the cities.

“It can be tough, as not everybody wants to move to Des Moines, Iowa,” he quipped, adding that New York is likely to be a bigger draw.

Meanwhile, EA’s Smith noted how many in the industry are “having the wrong conversation” around talent and in-housing. She elaborated that there is too much emphasis on location, pay and promotions, especially in companies that inherently don’t have media in their DNA.

“We were very focused on not [just] the role we hired them into but the competencies they brought to the business and how we could see that playing well in other parts of the business,” Smith said.

When describing her own approach to building an in-house team, Smith explained that she prioritized thinking about how applicants to the in-house team could potentially contribute to EA’s overall business.

A hybrid model emerges

For many, the decision to in-house is not simply black and white, with various working shades of gray.

Smith highlighted how the gaming giant recently appointed m/SIX to assist with traditional media buys, a resource that can then be used for insights toward its online media planning.

Similarly, Nestlé was quick to recently highlight that while it has taken greater charge of its online media buying, it is still leveraging its relationships with its network of agency partners.

All aforementioned interviewees recommend marketers don’t take a binary point of view when it comes to making a decision on whether or not they should in-house.

What’s more, agencies will have to broaden their horizons. In the words of Webster: “As far as the agency of the future is concerned, there are two models they will have to work toward, train or execute. … You either teach a man to fish, or you fish for them, as the client wants.”

Annoyingly, the only correct answer to the question of whether to in-house or not is: It depends.


@ronan_shields ronan.shields@adweek.com Ronan Shields is a programmatic reporter at Adweek, focusing on ad-tech.
Publish date: December 27, 2019 https://stage.adweek.com/programmatic/taking-media-in-house-is-not-a-case-of-one-size-fits-all/ © 2020 Adweek, LLC. - All Rights Reserved and NOT FOR REPRINT
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