Number of in-house agencies rise dramatically, ANA study finds

The trend continues as more complex offerings emerge in-house, but expansion and management of resources poses as one significant challenge.

Number of in-house agencies rise dramatically, ANA study finds

Nearly 80 percent of Association of National Advertisers (ANA) members have some form of in-house agency, a new report by the organization has revealed.

The study found that the number has grown substantially over the past five years, with rapid increase in 2018. This is compared to 58 percent of marketers who took some form of advertising in-house in 2013, and 42 percent in 2008 -- the last two times the survey was conducted.

Around 45 percent of respondents established their in-house agency within the past five years.

"This report makes clear that the work being done by in-house agencies is no longer confined to ‘low-hanging fruit’ such as collateral/promotional materials and internal videos," said ANA CEO Bob Liodice.

"Traditional agencies are becoming increasingly challenged as marketers move more work in-house while encouraging their external agencies to provide differentiated services and increased value. We expect the current trends to continue, with accelerated client movement to in-house agencies."

In addition, 90 percent of 2018 respondents said the workload of their in-house agency has increased in the past year, including 65 percent who said the workload has increased "a lot."

The survey revealed that in-house agencies provide a range of services, including strategy, creative for both traditional and digital media, and media planning and buying. Services that have grown significantly over the past five years include creative strategy, media strategy, social media (both creative and media), and programmatic media buying.

Respondents said that cost efficiencies were the primary benefit of moving agency services in-house, followed by better knowledge of brands, speed and nimbleness, and institutional knowledge.

Respondents overwhelmingly (79 percent) expressed high levels of satisfaction with the work of in-house resources, with 37 percent indicating they were "completely satisfied" with the work being done by these teams.

While marketers are turning increasingly inward — respondents said more than half of the total amount of work (58 percent) is done in-house — the survey also showed that 90 percent still work with external agencies.

The biggest challenges for in-house agencies are related to managing growth. Specifically, the two top challenges are managing workflow (increased projects) and efficiently managing resources.

The study also indicated that there has been a marked increase in the amount of specialty services offered by in-house agencies in the past five years. For example: content marketing is handled in-house by 75 percent of current respondents compared to 34 percent in the 2013 survey, while data/marketing analytics are handled in-house by 59 percent of respondents versus 42 percent in 2013.

In addition, several specialty services not provided as options in the 2013 survey are now being handled in-house. These include influencer marketing (39 percent), experiential marketing (38 percent), and commercial production (22 percent).

Brian Wieser, senior research analyst at Pivotal, said that although the study’s insights are important for investors to consider when looking at the business, it can be difficult to specifically connect the data in the study to revenue performance for the industry.

"Survey results suggest a flow away from agencies and towards marketers, and agency revenue growth certainly decelerated in 2016, 2017 and so far this year vs. prior rates of growth; in-housing may be a factor," he explained.

"From our vantage point, we have observed that reduced spending on creative services in general paired with enhanced contract scrutiny on media agencies are probably the biggest factors impacting the business. Of course, both of those trends overlap with aspects of in-housing."

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