Clients are taking media in-house because they understand their own business better: HCF marketer
Taking media in-house gives marketers greater control and transparency, HCF’s chief marketing officer Jenny Williams has said.
Jenny Williams, CMO at HCF
Speaking on the Ad Tech leadership panel in Sydney yesterday, Williams said the old media agency model of “here’s a few million dollars, go generate some leads” is “no longer fiscally responsible”, and in many cases, it’s better to have people in-house working for the brand.
“I would argue that the idea of bringing media in-house is about clients having control and transparency,” she said.
Clients that want to take media in house really need to take a step back and look at their own staff before assuming that the agency by default is expensive, detached and not driving results. Focus on who you have managing your agency and you can achieve great outcomes. This article is loaded with assumptions and hypotheticals.
It’s talking about strategy, which yes does require a level of assumption and hypothetical thinking. But the commentators bring it back to strong fundamentals, facts if you will – you can hire people who can do that work and by doing that, you can avoid the mark-up, lift transparency and potentially improve alignment. Will that mean marketers will need to look at their people and bring in new capabilities? Agreed they absolutely will.
This is an observation not a criticism. I spent most of my life in agencies and now work client side. Agencies are generally under the gun – that means they always have a deadline. Every job in an agency is tied to a budget so you generally say to yourself how long do I have to do this. Clients don’t run their activities like this. Things take as long as they take – there is no budget for the hours – that’s because the person is there all day regardless of whether they are busy or not. In my first 6 months client side I found myself finished by 11am simply because I was in agency mode. Meetings and other nonsense filled the days. I’m not sure these savings will ever be realised simply because humans fill the time available.
We have certain issues with lazy agencies. We do the schedule and they just cut and paste and plop a margin on it…..
Whilst she is right that moving media buying in house eliminates agency margins and hence saves them money (presuming you can easily find smart, effective agency-style talent that just wants to work for the glory of HCF every day of the year), keep in mind the agency fee is on average just 5% of the total media spend.
The value media buying agencies bring is bringing the media price down for the other 95% of spend. The value is at least 10% because of the media agency commission which gets returned to client, but usually its about 20-30% more than what a client can negotiate in isolation. It is the group buying power of the agency groups that is lost by going in-house.
So while she may turn her $5 agency cost into $4 via internal staffing, Ill put my house on it that her $95 of media spend will now cost more than $96 going forward. HCF is not a Harvey Norman or a Unilever with so much media spend they can negotiate huge deals on their own.
Most clients hate media agencies, and also vice versa. But the power of economies of scale in buying is why media agencies still exist.
I think there is fair argument on both sides…in-house can certainly create cost efficiencies but external also has the network & ability to leverage better media rates overall..
My concern would be that any cost benefits are absorbed by the agency on top of their regular margin & clients are being stiffed by not realising any savings from their external media agency.
I would, however, say that external agencies bring value to the table by virtue of being outside “the internal politics or culture”….I am sure that Jenny is a great leader…but…the desire for an employee to “toe the line” and develop what they think the business wants vs what it needs could get lost with an internal only digital buying team.
An external media agency is great for challenging the status quo & bringing different ideas to the table….they may not be the right ideas but they do help firm up your strategy & planning overall for a stronger outcome
@Alistair – do the math. Out of $100, $95 is media rates and $5 is agency fees.
Saving a little bit of money on the $5 (at most $1 saving by employing people in house?) is not much.
In the meantime, your $95 wont be $95 if you are not using your agency buying power and relying on your own.. it will be higher trust me. Ask any industry consultant or auditor.
From a cost basis, the key is to ensure you can buy efficiently on the $95. If you are not worried about costs and budgets, this is a lovely position to be in and so you could bring media buying in-house for various positive reasons (and some downsides as you mention).
But my point is, it is simply not correct to state that there are cost savings to be had be eliminating media agencies and doing it yourself. As per above post, media agencies can procure media for 20% – 30% cheaper than what a client could negotiate in isolation. This is because they use huge group buying power. Not to mention all the access to special deals/shows/sponsorships and the additional analysis and insight they can bring that would not be offerred to a small client in isolation.
Most clients hate media agencies, and also vice versa. But the power of economies of scale in buying is why media agencies still exist.