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News Plus 23 Feb 2021 - 2 min read

The question is how mediocre you want to be: Digital agencies dismiss in-housing hype

By Brendan Coyne - Editor

In-housing: another wave or too resource intensive?

Independent media and digital agencies think those predicting another wave of in-housing may be disappointed. They say re-outsourcing is more likely as brands discover investment and resource is significant while results can be underwhelming. 

What you need to know:

  • Agencies are unconvinced Australia is on the cusp of post-Covid wave of in-housing.
  • They say it's too labour and cost intensive for most brands for results that can be average.
  • But changing data and privacy rules could drive further hybrid arrangements.
  • Transparency and rebates remain an issue, but brands that are transparent with agencies will win.

Hype cycle

Media agencies have questioned claims Australia will see a wave of in-housing in 2021 as brands seek post-Covid cost savings.

They also suggest brands should be more transparent with agencies in order to deliver stronger outcomes.

But they predict hybrid models will continue to flourish, particularly as data and privacy regulation gives brands greater impetus to reevaluate what they should keep in-house.

Talent costs

“When clients are making the decision to take media planning, particularly digital media, in-house, the question is how mediocre they want to be,” according to Switch Digital boss Lee Stephens.

“The best talent does not want to spend 40 hours a week on the same brand or product. They want variety and they want to be challenged.”

Meanwhile, said Stephens, “you can’t just hire a digital guy … you will need multiple people as the roles within digital media planning vary dramatically”.

That soon gets expensive, puncturing the business case.

This is Flow CEO Jimmy Hyett said there are also system costs to consider, plus scale and breadth of knowledge that brands cannot hope to replicate with a handful of staff.

“With the right systems in place, there could be some savings for savvy brands with time, resource and recruiting ability,” he said. “But it is a long and costly process to get there.”

Haydon Bray, CEO, Audience Precision, said in-housing’s “primary benefit is the opportunity to remove the ‘murky’ layer of digital activation” increasing transparency and control while keeping data under one roof.

However, a common drawback is “a lack of objectivity with planning”, said Bray.

“The in-house team could slowly become myopic around performance and can lose outside perspective: You might think you are getting great results, but in comparison to others in industry, you might not be.”

We optimise towards gross profit margins for the client. So we need clients to be transparent with us on profit for every single line item.

John Vlasakakis, head of organic search, Next & Co

Two-way transparency

John Vlasakakis, head of organic search at performance agency Next & Co, said concerns around transparency remain valid, particularly around fee structures and rebates.

But he said transparency cuts both ways.

“We run our optimisation towards gross profit margins for the client. So we need clients to actually be transparent with us around their gross profit or net profit.

“We ask them to be as transparent as possible with every single line item, because we want to be focusing efforts on where they make more money,” said Vlasakakis.

“But we are very open with them about where we make our money and how much we are making.”

He said brands are “surprisingly” receptive to that approach, which then moves the conversation away from pricing.

“When you are helping them smash KPIs, they are going to make more profit … so they will spend more money with you.”

Reverse swing

Both Audience Precision and Next & Co (and likely much of the industry) are working with clients on hybrid models or as external advisers to in-house teams.

John Vlasakakis thinks hybrid models will continue to develop and grow in popularity but that, outside of tier one brands, they will probably still lean more heavily toward outsourcing and external talent.

“People have tried to copy the big brands,” he said, “but the reality is that the vast majority of brands don’t save by in-housing digital, and they are the ones now shifting back.”

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