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.
“What I struggle with is that I have people at a senior level in my business that think about my business seven days a week – well five, they get to take the weekend off.
“But these are people who may have come out of agency-side at a client director level, and they do nothing all day except figure out what our brand’s about, what that means for the business, how we optimise it, where our data sits, what they need to pull together, how they need to extrapolate that, what sort of econometric models they need to apply.
“We can’t get that level of focus on that problem – which is ‘How do I spend money in a smart effective way?’ – I cannot afford to buy that in an agency, or a consulting firm, because the purpose is about saving money. The purpose is about being more efficient about how I spend the money,” she said.
“That’s why we’re bringing it in-house, because we have the knowledge base internally that we can leverage. It doesn’t mean we don’t need the assistance of agencies, I just think it changes their role.”
Williams explained clients will increasingly be wanting to control where its money was placed by bringing planning in-house instead of handing budgets over to media agencies.
“The challenge is, why would I pay, not only what it costs them to earn money, but an agency margin on top of it? That’s the bottom line. Why would I not hire them myself instead of paying an agency margin?
“And at this point in time I can structure their remuneration such that what I want to achieve is what gets delivered and I can invite them to a meeting and not think they’re going to try to figure out how to up-sell. Those are the bottom-line facts about why it makes sense to have people in-house versus outsourced.”
This potential conflict between brands and agencies will also see more media agencies merging with their creative counterparts, eHarmony’s marketing director Nicole McInnes said, because brands no longer have time to balance in-house staff and numerous different agencies.
“The hard thing is for clients, as our businesses have got more complex, we’ve got less time, and so trying to brief two separate teams for everything and keep two separate teams abreast of everything that’s going on within your organisation, make sure that they’ve got access to the right data at any given time so they can do their jobs – it’s just too hard,” she said.
McInnes: Creative and media will merge
“We’re only really small and so I definitely don’t have time to have two or three agencies that I keep up to speed. So my thing is really about consolidation. I think we’re seeing it already. There’s quite a few agencies merging media and creative together and I think that trend will continue as the market becomes more competitive.”
Stuart Gurney, national head of strategy at media agency PHD, contended agencies actually see consultancies as their biggest threat, but this was dismissed by Williams.
“In some ways you could argue it’s no different. You’ve just got a different rate card in PwC versus a media agency,” said Williams.
McInness was in agreement: “I don’t think consultants will be that much of an issue”.
Gurney argued consultancies are “genuinely a huge threat”, but conceded the transparency issue was just as pressing for media agencies.
“As an industry we have failed in that transparency element and the thing that actually makes me encouraged in this area is the most common question we get asked in pitches is about transparency. So it’s obvious that the industry is waking up to that.”
Making it clear she was referring to groups other than PHD’s parent company Omnicom, Jo Gaines, APAC managing director for data management platform Krux, said media agencies needed to start justifying their models.
“There’s still an issue with transparency. Like, what technology do you own? What’s your kickback? What’s your mark-up? I think there is a place for being transparent and justifying why you are adding those mark-ups.”
topics
Ad Tech
creative agencies
eHarmony
HCF
Jenny Williams
Jo Gaines
media agencies
media transparency
Omnicom
PHD
Stuart Gurney
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.
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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.
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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.
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We have certain issues with lazy agencies. We do the schedule and they just cut and paste and plop a margin on it…..
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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.
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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
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@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.
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