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By: Tom Murray | Managing Director, Agency
One of the biggest trends in marketing right now is that brands are starting to take more and more of their media in-house. With the rise of both many D2C startups that were built from the ground up with venture capital funding, as well as larger brands starting to hire experienced agency veterans, brands have tried to cut costs and bring the knowledge inside their organization. To take a page out of the great Ray Dalio’s book Principles, this move sometimes takes into account the first order of consequences, but fails to keep in mind the second, third and fourth order of consequences.
The case for bringing media internal is an attractive one, there is no doubt about that. Hiring experts to work only on your brand means 100% laser focus on your brand’s goals, and not some other brand that has a bigger spend at whatever agency they would be at instead. The salary costs could be lower if you train from within and have a good leader at the helm. The internal team would also become immersed in the brand and become product experts, living and breathing the product. This sounds great in theory, but there are a few underlying problems with this mindset that could outweigh the potential benefits.
Costs are often the most underestimated thing when shifting from agency to in-house. Agencies provide many services, many of which are not in the scope, or that expand from just media buying. Jump (as well as many other agencies) offer media buying, creative services, reporting & tech stacks – a full team of diversified specialists. Often times clients see the agency fees as something that can be replaced by a few people, but there are often more people involved on the agency side that may meet the eye.
The above only took into account the salary, but there are so many other costs that come with hiring an internal team. When all is said and done, the “cost savings” likely go away, and eventually cost even more than the original agency costs.
- Reporting team members (to replace the agency reporting team)
- Creative team members (to replace the agency creative team)
- Computers & technology software / hardware
- Office perks (happy hours, team events, snacks, lunches, etc)
- Benefits (Medical / Dental / Vision / Life Insurance)
- 401K Plans & Matching
- Rent / Office Furniture
- Training Cost (both in terms of outside trainer cost & internal team time to train)
- PTO Liability (accrued vacation day cost)
- HR Costs
- Raises in the future
- The list goes on…
Something that gets severely discounted when going internal is the loss of knowledge from running other media for other clients. This causes an over-reliance on platform partners to provide knowledge, and they likely don’t have as much technical experience as an agency, and are just reading from a playbook. There is nothing like actual media buying experience to share learnings and insights.
Even if your specific agency team has say, three people on it, those people have access to the entire agency knowledge base sharing network, which is often times priceless. In my current and previous roles, there is not a day that goes by where someone (in your office or an office in another location across the country) asks a question to the whole company and gets an answer from someone within a few minutes with experience to help them with their specific scenario.
By only using an internal team, bias starts to occur for things that only have affected your account. It also creates a false notion that other people’s experiences running on Facebook or Google is simply not applicable to their brand because it isn’t an exact comparable. This is a dangerous mindset to build a habit around, as this will cause you to experiment less and think that only your way is correct. We see this time and time again when we run diagnostics on in-house team performance, with the same things being run over and over again when it was clearly time for a shift in strategy.
An agency team however that are specialists in each of their disciplines (search, social, display, etc) can truly take campaigns to the next level. With one of our clients, when we took over the media buying responsibilities, over six months we saw a lift in sales by over 2000%, all while coming in at a 15% lower cost-per-acquisition. That was with limited brand knowledge and included a ramp-up period. The misnomer that internal knowledge of a brand trumps expertise in a platform & proven processes for success is completely unfounded and will tend to result in the loss of growth. Even if there are some cost savings (depending on team size), the loss in productivity and efficiency in running the actual media will still outweigh those savings by quite the margin.
Internal marketing teams that get dragged down into the weeds of campaigns often time obsess over the data as it is their “baby” and are ultimately accountable to the numbers in the account. This is something that could be passed off to a specialized agency to help manage campaigns effectively, and scale them to new heights.
The more time internal teams, who have the best sense of the consumer, target market, and the brand position, are able to spend more time on go-to market strategies, new products, and focusing on increasing brand awareness, the better. This tends to get sacrificed by internal teams who are always trying to just hit their numbers, which is a very short-term view. This means foregoing the tactics that help grow brands from $1M to $100M such as brand building.
Overall, the desire to shift from agency to in-house is an attractive option on the outside. As someone who has worked at ad agencies for seven years, I’ve seen my fair share of clients take their business internal to varying degrees of success. More often than not however, within 12-18 months, the decision gets reversed and the brands are right back to square one and needing an agency to hit their lofty growth goals. We’ve already seen this with some of the largest brands in the world such as Pepsi, with their now infamous campaign with Kendall Jenner commercial back in 2017 that was created by their internal creative agency. And where is Pepsi now? Still using plenty of external agencies!