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News Plus 24 Aug 2021 - 3 min read

Hidden in-housing boom uncovered: 67% of Australian marketers use in-house agencies and it's rising

By Danielle Long - Contributing Editor

ANZ Bank CMO Sweta Mehra: “It pains me to pay two thousand dollars, five thousand dollars for tiny edits…which frankly my son could do…the intention is a lot of the grunt work, which is about scale, that is what we will be bringing in-house.” Pic: Breno A

The deployment of in-house agencies by Australian brands is booming and significantly bigger than anyone predicted according to new research among marketers and agencies. The findings from a newly-formed, in-housing industry group led by marketers including Optus, Sportsbet, MYOB and Carsales show Australia is closing the gap on the US where 78% of brands say they have internal agency services. 

There are a lot more people doing this behind the scenes than are talking about it. I had estimated it was somewhere in the range of 20 per cent… and I thought I was being relatively generous

Chris Maxwell, IHAC chair and Lution CEO

What you need to know: 

  • 67 per cent of Australian marketers are working with an in-house agency, and a further 14 per cent are considering in-housing, according to research by the In-house Agency Council (IHAC)
  • The findings suggest the local market is closing a five year gap behind the US, where 78 per cent of marketers had in-house agency facilities in 2018. 
  • Larger businesses with larger marketing budgets tend to have in-house agencies, but the size of these in-house units vary from 5 to 50 people. 
  • In-house agency services predominantly include creative, content, social and digital and strategic services, while media buying and SEO is managed externally. 
  • 77 per cent of marketers with in-house agencies also work with external agencies.

Chasing America

Australia's in-house agency penetration is significantly higher than predictions suggested, with new research finding 67 per cent of marketers are working with an in-house agency, and a further 14 per cent are considering in-housing. 

The findings suggest the Australian market is closing a five year gap behind the US in terms of in-house agency penetration and shows Australia is a more mature market than many had anticipated.

The research from IHAC, the newly formed In-house Agency Council, and Kantar Research mirrored a study conducted in 2018 by the peak US advertiser body, the ANA, which found 78 per cent of marketers had in-house agency facilities.

The IHAC survey included 105 marketers – both with in-house agencies and without – along with agency executives. IHAC defines in-house agencies as “a department, group, or person that has responsibilities that typically are performed by an external advertising, media or other marcom agency.”

While the definition allows for the inclusion of a social media manager or designer as an in-house agency, it does not include an internal PR function.

Great agencies are the best gifts that any marketer can get. However, there's a massive amount of pressure on cost as you look at what the marketing function needs to create

Sweta Mehra, CMO, ANZ

Estimates undercooked 

In June, Mi3 revealed Optus, Sportsbet, MYOB, Carsales and News Corp had joined forces with in-housing consultancy Lution to create IHAC, a not-for-profit industry body for in-house agencies. IHAC founder and chairman and Lution CEO Chris Maxwell - CUB's former marketing boss - told Mi3 he was surprised by the breadth and depth of in-housing penetration uncovered by the study.   

"I had estimated it was somewhere in the range of 20 per cent, and I thought I was being relatively generous," Maxwell told Mi3. 

"The lack of noise around this model in Australia is why we thought [the percentage was lower]; until this year no one was really talking about it. But this demonstrates there are a lot more people doing this behind the scenes than are talking about it, and that shows there is huge potential in this market." 

"We've captured the broad range of businesses and approaches, from the Sportsbet model which is a fully-fledged integrated in-house agency with 60-odd people, down to the businesses that have one social media manager and a designer, which is an in-house agency by definition as it's doing work that would historically be outsourced to an external agency." 

IHAC's research shows most companies with in-house agencies were businesses with more than 300 staff (49 respondents); however, in-housing was also strong among small businesses with between 21 and 49 staff. While the majority of media budgets were below $500,000, there are several in-house agencies with budgets of more than $30m. The size of the agencies also varied, with the majority of in-house agencies employing between 5 and 50 people.  

In-house agencies handle a broad range of services, the most common being creative, content, social and digital and strategic services, while media buying, SEO and website development are more likely to be out-sourced. Video production services are most likely to be managed by an external agency; however, 58 per cent of agencies have some video production capabilities. 

Most people who have an in-house agency believe the right way forward is a mix of in-house and external agencies. There is a hybrid model and we are big believers of getting the right people to do the right jobs

Chris Maxwell

Trendline, workloads on the rise

The research comes as marketers ramp up their in-housing ambitions and investments. Last week, Koala, the mattress and homewares brand, announced plans to bolster its in-housing capabilities. Last month, ANZ CEO Sweta Mehra revealed the financial services giant's plans to expand its in-house agency services. Meanwhile, production company Palomina, which works with Sportsbet’s in-house agency, has positioned itself as an expert to work with in-house agencies. I

The research revealed that marketers preferred to work with both in-house and external agencies, with 77 per cent of marketers using the hybrid model. However, 70 per cent of the work, on average, is done by the in-house agency.  

“For client-side marketers, this is the model of the future, and this is what people are going to be doing more and more. Most people who have an in-house agency believe the right way forward is a mix of in-house and external agencies. There is a hybrid model and we are big believers of getting the right people to do the right jobs," said Maxwell.

The research also suggests the growing appetite for in-housing will only continue, with 73 per cent predicting their in-house agency's workload is set to increase in the next 12 months. 

Cost efficiencies, greater speed and agility and a better understanding of the brand were listed as the benefits of in-housing by marketers already working with an in-house agency while managing workflow, prioritising projects and expanding capabilities were cited challenges. 

Marketers that do not work with in-house agencies ranked full ownership of data and greater control of output and data as the benefits; however, they ranked set-up costs as the biggest challenge. 

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