Two-thirds of large multinationals now have an in-house agency

Two-thirds of large multinationals already have an in-house agency, and another 21 percent are considering creating one.

The 66 percent figure represents a 16 percent increase in the number with these resources in 2020, the last time this research was conducted. The number considering the domestic option also rose from 17 percent in 2020.

Although most of these units are relatively new – almost three-quarters are between 1-5 years old – their skills are expanding and 70 percent of respondents now claim to have some form of in-house strategic capability – be it brand, creative or media , up from 65 percent in 2020.

The survey suggests that many are also planning to expand the scope and scale of their domestic operations. Over the next three years, 56 percent of respondents expect to move more digital production from external agencies to in-house, 33 percent of respondents expect more offline production, 22 percent expect to outsource more data strategy work, and 11 percent plan to move more data management and insight and analysis tasks.

Online planning and buying were cited as additional areas of future growth, with 83 percent of respondents expecting to handle some social media buying in-house in the next three years (up from 37 percent currently), 67 percent planning to add social media planning (up from 48 percent) and 50 percent want to take on digital media planning and buying tasks (up from 33 percent and 26 percent, respectively).

The results are based on responses from 45 companies with an estimated annual global advertising spend of $60 billion. Seven percent of respondents spend more than $50 million annually on their in-house agencies, the same percentage spend $25-50 million, 33 percent spend $5-25 million, 13 percent budget $1-5 million, and 27 percent spend less than 1 million dollars.

While cost efficiency appears to remain the strongest motivation behind back-office growth (83%), other factors such as faster and more flexible processes (76%), better integration (59%) and increased brand awareness (59%) ) also drive adoption.

Overall satisfaction with the work done by these agencies is high at 86 percent and there has been a significant rise in “complete satisfaction” from 23 percent in 2020 to 33 percent in 2023.

All respondents continue to work with external agencies, many of which are still used to support implementation when internal capacity is stretched.

“The rise of the in-house agency is one of the big changes in how big brands manage their communications needs in recent years. Although cost was the initial driver of the trend, successful operations have demonstrated that they can provide significant additional benefits, such as speed of response. The greater maturity of the sector also gives brands more confidence to expand their operations both in terms of scale and capabilities,” said Stephan Loerke, CEO of the WFA.

One notable finding, however, is that the performance of internal agencies is not measured on the same basis as that applied to external agencies, which are typically evaluated on performance. Internal measurement remains more focused on outcomes than results, with the top three KPIs being 1) 67 percent quality of work, 2) 47 percent speed to market, and 3) 40 percent cost savings.

Other key findings include:

Change in challenges: in 2020 the big challenges were managing workflow (scaled projects), prioritizing projects and expanding capabilities and skill sets, in 2023 it was integration between internal and external resources and end-to-end resource management.

Finding the best team: Attracting and retaining talent are issues for 20 percent of respondents, although turnover remains low.

Keep it central: The centralized studio model is most common among survey respondents – used by 67 percent of respondents (up from 50 percent in 2020) and workloads are increasing – 75 percent say the volume and complexity of work is increased.

Strong creativity: The staff appears to be dominated by “creatives” (47 percent), with account management and production accounting for 18 percent and 20 percent, respectively. Other functions include traffic, media and operations. Agency structure varies (even within companies that may use a range of operating models across their operations) widely, with 83 percent of respondents choosing full in-house, but 28 percent using external in-house agencies and 24 percent using a range of freelancers .

“Given budget pressures and the desire to deliver assets faster, more efficiently, and at lower cost, it’s no surprise that the growth of those developing in-house offerings continues unabated.” The rationale is obvious and the benefits are significant when you get it right. But if there is a “caution” it is that, especially with content, businesses need to make sure they are not just producing “stuff” to meet expectations rather than needs. Efficiency is key to ensure that all your efforts are not simply wasted and potentially harmful to both your business and the planet, given the carbon footprint of digital activity,” said Stuart Pocock, co-founder of The Observatory International.

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