Teavaro's lead consultant Ben McDermott takes a look at the increasing move from outsourcing to in-housing for digital marketing departments across major brands. Why now? What are the benefits? And what can agencies do about it?
Strange then, that so many of the problems faced by the industry several years ago – transparency, control, trust – still remain, more or less unaffected by another year of start-ups and industry stalwarts. What is not strange, however, are the increasing numbers of big brands choosing now to do something about these problems, rather than waiting on the reassurances of an industry that seems quick to move in other areas – such as adopting new technologies and adapting to new channels – but relatively dawdling when it comes to addressing widespread concerns.
But why now? Well, in-housing is not a new phenomenon by any means, but it does seem to have been reinvigorated, inevitably, by GDPR. Control, transparency, accountability – the new regulations poke their talons into the very open wounds that have been aired for years without truly healing. With the promise of colossal fines, brands have been handed the impetus to begin taking matters into their own hands. From this perspective, it seems obvious that first-party data use calls for a first-party data strategy.
But it’s not just GDPR. When P&G, the world’s largest advertiser, reveals a reduction of $750m (£576m) in external fees since 2015 through the reduction of the number of its agency and marketing relationships (with plans for a further $400 million by 2020), it becomes apparent to all that there are efficiencies that can be exploited.
In their article for The Boston Consulting Group last month, Visser, Sheering & Field noted:
“One reason for the shift is the mounting frustration with agencies, owing to slow turnarounds, the lack of cost transparency, and, to a lesser extent, the lack of digital skills—the very skills needed for navigating today’s complicated digital marketing environment.”
Removing the 15-20 per cent standard agency mark-up seems to be just one part of these savings: direct relationships with publishers, tighter control on marketing relationships and further in-house sourcing, for creatives, strategy, planning, and so on, can bring further monetary efficiencies.
But what, as suggested by Visser et al, of the non-financial benefits? Other brands have noted similar improvements in KPIs across their digital marketing efforts, or simply in their business understanding and agility. Indeed, shortening the chain can improve the speed to market, with months and weeks becoming weeks and days; in efficient, focussed and pro-active hands, control becomes manoeuvrability.
It is interesting to note how, in the quote above, digital skills have become a tick in the gains column, when the agencies so often argue the counter; that digital skills are exactly what in-housing can lose a company. It is fair to say that there are not enough digital specialists to cover even current need, and thus if in-housing becomes the preferred strategy, these resources will become rarer. But the fact that this is a contentious point further reinforces the idea that agencies are not fulfilling their clients’ needs where their purported strengths lay.
Further negatives to insourcing cited by critics, such as pricing negotiation and access to industry-wide learning, don’t really apply to the big names currently announcing their in-housing plans, particularly when they have access to adequate resources that will help them counter these issues. It is fair to say that even Google will pick up the phone when your annual worldwide spend has several bunches of zeroes attached to it, low-hanging fruit to tempt their marketing teams. Agencies are then left with no other option than to smile through the change, and pretend losing the majority of their fee from a major client was part of the ongoing plan.
Bringing us back to the problems (beyond the crass topic of the bottom line) that brands often cite as their reason to “go it alone” in the first place– agility, flexibility and control – it is here that Teavaro, one of the solutions in the aforementioned LUMAscape, is best placed to comment.
Much of the speed and agility of the advertising behemoths such as Amazon and Google, comes down to their technology. With their capability to plug-in new solutions, or test new hypotheses, comes the incremental gains that keeps their value ever increasing, as they continually optimise and outperform. Connector technology, such as Teavaro’s FunnelConnect, does the same for the digital marketing industry; for brands, for publishers and for agencies alike.
Of course, in-housing isn’t necessarily an all-in strategy. There’s no need for a brand to slam doors in the face of the industry, retreating to their laboratory in search of the secret alchemy of advertising, emerging only when display interactions have magically converted to gold. By picking and choosing the correct solutions and the correct strategy and implementation, a smorgasbord of in-house and partner activities can be combined to create a powerful, bespoke initiative that will utilise efficiencies across first-party and partner skillsets whilst ensuring agility and flexibility alongside the control and transparency needed to run an effective data marketing program, and enjoy the best of both worlds.
An example? A client of Teavaro’s required a solution to their permissions management issues that had arisen from GDPR. With a view to building more in-house capability, the client turned to Teavaro to enable the capabilities needed. The result was a bespoke permissions management solution that anchored in a first-party data strategy utilising a first-party marketing identifier that would prove more effective than any third-party provider on the market (and far cheaper). Thus while the client retained their in-house ethos, they retained the efficiencies, both financial and in speed-to-market, that Teavaro, as a industry specialist, could provide.
For many of the problems faced by the industry, there resides, somewhere in the ecosystem, the solution. More often than not, the issue comes down to implementation, which can be both costly and slow, particularly in a legacy environment. For brands moving to a full or even partial in-house solution, the increased technological requirements can be hidden, and the benefits of such a strategy will not be realised by a few good hires. Agencies too can maintain their edge by incorporating new solutions to their offering that demonstrate to clients that their needs are being addressed.
Rather than focussing on the relative merits of in-housing against outsourcing, looking towards implementing a mixture of both seems to be the inevitable and most efficient outcome. With connectors like Teavaro, aiding brands, media owners and agencies to best realise these opportunities, the industry and its clients can forge the relationships that will reach that equilibrium with maximum efficiency and minimal disruption.
Ben McDermott is lead consultant at Teavaro