In-house or agency? It's not a binary decision

There has been chatter about advertisers building in-house capabilities forever. The most recent development relates to biddable media, where the advent of companies such as Google and Facebook has enabled advertisers to deal directly with media owners with little friction. The growth of biddable media—paid search, programmatic and paid social (any media that can be purchased via live auctions)—and a general loss of trust in agencies have resulted in increasing noise about advertisers moving towards in-housing.

The number of advertisers moving away from agencies and taking their marketing services in-house has risen to record levels, according to research by the Association of National Advertisers. And there's an increasing number of big names setting the example of bringing media buying in-house. Take Uber, which now has an in-house ad tech team and does its own strategy, buying and optimisation. This change wasn’t motivated by a desire to cut costs, but by a need for ownership. The question isn't "who is taking marketing in-house?" any more; it's "who isn't?". Lego, Intel, Revlon, T-Mobile, Duracell and Unilever are just a few names that have taken more control or even set up their own in-house agency. And, truthfully speaking, I applaud them.

I can understand why some are concerned about the future of agencies, and in-housing is just one of the new challenges faced by the advent of biddable. I’d argue that, in spite of the current appetite for in-housing, agencies are more important than ever for best-in-class biddable media.

At the same time, there are also some things that must be moved in-house. What advertisers really need to do is understand where the lines are drawn between "must outsource" and "must in-house". What falls between these lines is then a more subjective decision for each company, based on what is right for them and their particular business context.

The in-housing discussion is useless without context. We’ve been having conversations with advertisers for some time about in-housing and what it means to them. For many, it’s as simple as owning their own data and paying their suppliers directly—a no-brainer and second nature to Brainlabs, since we strongly encourage all our clients to do this. The new wave of in-housing, ultimately, is a long-overdue response to an outdated business model built around the concept of media trading, which is irrelevant to the world of biddable media.

We have to think of in-housing as a spectrum. On one side of it, we have the parts of biddable media that must absolutely be owned in-house, such as contractual relationships. On the other side, there are services that should always be supported or owned by agencies. Then we've got everything in-between, the activities that can be owned in-house or not, depending on the goals of the company. We’ve put together the anatomy of in-housing, indicating where each of these activities falls on the in-house/outsource spectrum:

Must own in-house

Direct partnership with platforms

Buying media from lots of suppliers and reselling to clients the traditional way does not apply to biddable media. Everyone can log in to the same platforms, so marking media up makes no sense. Moreover, it’s administratively inefficient for agencies to contract with platforms; they’re here to supply services and deliver a transparent model to clients.

Contractual relationships must sit in-house. This is the single most effective way of ensuring transparency. It’s also a sensible move for advertisers that want platform owners to focus on their needs, rather than an agency’s.

Commercial ownership

Most of the adspend in digital goes to the main suppliers in search and social that control 99% of the market. These platforms have standard terms of service and credit terms, so it’s easy for advertisers to directly contract and manage relationships with them. Consolidating media buys with chosen platforms allows brands to be in full control of how and where the money is spent, ensuring financial transparency.

Data ownership

Agencies doing the entirety of buying, attributing, measuring and owning their clients’ data is untenable. Data acquired during the course of a campaign must be the legal property of the client rather than the agency. Without this rule, agencies can hold clients at ransom.

Strategic direction

It probably goes without saying that this needs to always come from the advertiser. No external party can have the level of understanding of a business that’s needed to determine its long-term strategy. The point of in-housing is to simplify things from a structural perspective and instead expand marketing strategy, showing the right message to the right people at the right time in a smaller ecosystem to fully understand the customer journey.

Budgeting

Never let an agency decide your budget. If the agency is working on a commission basis, then even the most dedicated is going to be tempted into spending more than is advisable. At the same time, though, leave room for flexibility: setting tight restrictions on spend can be counterproductive in such unpredictable markets of biddable media.

Brand ownership

This doesn't mean you shouldn't use a branding agency—there are some awesome agencies out there doing work that would be hard to replace. It just means you need to police your brand if you're using a biddable media agency. Pay-per-click is still an important branding exercise, for example—the copy and keyword targeting need to be carefully vetted.

Should outsource

Third-party technology

You are an advertiser; you are not a martech company. Don’t invest millions into designing your own ad fraud prevention tool when there’s going to be a far superior one you can rent out for much cheaper. I'm all for simplifying your tech stack and owning the tech you use, but ad tech itself is necessarily complex.

Bespoke technology

Likewise for the software that’s based on a very specific need. There are agencies out there with tech teams who specialise in this and they will always do a better job. They have the ongoing exposure needed to understand the tech landscape and identify the tech that a client needs. You can get them to build it for you, without obligation to use any of the agency's other services.

Extra learning and development

A major risk of in-housing is stagnation. Agencies work with multiple clients, gain cross-vertical experience and continually hone their practices. They know how to attract and retain experts in their field. In-house teams have less organic development, so it’s extremely valuable to gain outside perspectives. This is why you must train your in-house teams externally.

Auditing

Similar to the above: don’t mark your own work. You need someone external to scrutinise your work, spot mistakes, identify opportunities and apply a different way of thinking than your own teams. Collecting and analysing data accurately is the bread and butter of digital marketing agencies. Audits performed by professionals can provide insights based on benchmarking accounts against each other to recommend top performance improvements, making sure that key business decisions are not based on inaccurate data.

Sometimes in-house, sometimes outsource

The rest is dependent on the individual; however, I have tried to place these activities on a continuum according to how often I would expect an operation to be in-house or not.

Attribution

I would have put this in the "must own in-house" section if it weren’t for the technical complexity. I would recommend that advertisers collaborate closely with an agency to work this out. You certainly need to keep a close eye on the working out; don’t let an agency dictate the value of their own work.

Audience segmentation

Once again, I think close collaboration is key here. Agencies are well-placed to make incremental improvements to audience targeting, based on the feedback they get during a campaign. But the ultimate decision needs to always come from the advertiser, because they are the ones that truly understand the brand and wider objectives of the company.

Data strategy

Biddable media specialists should be experts in using data, so it might make sense for advertisers to outsource data strategy to an agency. An agency is also likely to have established automation for collecting and analysing data, as well as a suite of technology for testing and reporting (all of which relate to data strategy). I place this roughly in the middle, because advertisers should always own their data and should always—whether outsourcing this or not—have people working for them that truly understand data.

Tech stack strategy

There have been issues with unnecessary complexity, leading to inefficiency and non-transparent practices. If you’re going to outsource tech stack strategy, opt for the agency that prioritises simplicity. Otherwise, as long as there’s a good level of trust, agencies should be able to make better procurement decisions than in-house teams. There are also economies of scale that agencies can utilise in using the same third-party tech for multiple clients.

Ad trafficking

When it comes to trafficking, we’re talking a complex set-up of targeting and segmentation options, ad formats and reporting. Not everyone has the time and investment to develop the skills for the technical set-up of ad campaigns. Ad traffickers can be hired in-house or in the agency, as long as they understand trends and best practice.

Mid-term strategic direction

This depends on what else is being done in-house. Both agencies and advertisers will have ideas about mid-term strategy based on their own expertise, so ongoing collaboration is important. While advertisers should oversee the overall strategic direction, if there's a trusting relationship with agencies, outsourcing some of the more detailed planning can be good for process improvements.

Standardised best practice

Agencies are best placed to develop and update best practices, but it's important for in-house teams to stay in the know and understand the main elements of best practice as well. Everyone should be working to the right standards and following guidelines to optimise performance.

Creative production

It's up to clients to decide whether they want to invest in the creative side of things. Biddable media agencies will usually have experienced copywriters and designers to write copy and produce creatives for programmatic campaigns, but some advertisers may prefer to provide certain assets first.

Execution

Although it's not essential to outsource execution, it shouldn't be left to amateurs. Agencies do what they do best by developing bespoke methodologies and tech stacks for clients in order to best respond to challenge, automate repetitive or humanly impossible tasks and continuously optimise. They have better access to support from certain advertising platforms, are quicker to adapt to platform updates and are more flexible for testing. Remarkable paid search results come from being well-equipped and adaptable—two things that all agencies should be.

Service model of the future

In-housing, as I’ve tried to show here, is certainly not a binary decision. You can in-house certain aspects of a biddable media campaign while outsourcing other parts. Advertisers need to reflect carefully on what it is they really need someone else to do—and, beyond that, what they’re really trying to achieve as a business.

Agencies, likewise, need to adapt their service model to be as flexible as possible. There is no place for a one-size-fits-all approach in the biddable era. To preserve their value among in-house teams and management consultancies, agencies need to be willing to offer as much or as little of their expertise as an advertiser might need. The agency business model is the same: do stuff that clients can't do better themselves. As long as agencies shift towards what clients actually need, there's no reason for in-housing to be seen as a threat to the livelihood of agencies.

I’m personally excited by the prospect of a more well-defined relationship between advertisers and agencies. If the role of an agent is to serve the interests of its client, then the service model of the future will surely be a great step forward in achieving that.

Daniel Gilbert is the London-based CEO of Brainlabs, a performance-marketing agency.