The rising tide of in-house agencies

For several years, brands have been taking on tasks usually left to agencies, across advertising, digital, PR, print, video and so forth.

Recently, a number of FMCG powerhouses and hotel chains have been greatly expanding their in-house marketing teams, and cutting back their agency rosters.

As content has become the new weapon of choice for many advertisers in their battle for consumers’ hearts and minds, hotel chain Marriott established the Marriott Content Studio two years ago with the aim to develop, produce and distribute compelling and relevant content to inform, entertain and engage its consumers.

Marriott’s first original short film Two Bellmen was launched in early 2015 and has had more than five million YouTube views. A sequel came out in early 2016 and now a third instalment is set to debut in January 2017.

Tony Chow, regional director of creative and content marketing for Asia Pacific at Marriott International, says brands are beginning to see the value of producing their own content in-house.

“We believe in the need to publish or perish given the target consumers we are after – next-generation travellers who are quick to ditch the pitch, and are more influenced by peers or influencers’ experiences,” he says.

He adds that Marriott can no longer adopt the traditional advertising route to win the minds, hearts and wallets of its targeted customers.

I do see the traditional advertising model is starting to break down, as the concept of content marketing is gaining traction.

Chow says the traditional agency model will find it harder and harder to stay relevant if its service offering is tactical and still in keeping with the conventional marketing model.

“Today’s marketing is two-­way communication and in real-­time.”

Technology has also engendered huge developments – and placed power in the hands of the consumers. Chow suggests brands and traditional agencies need to adapt, move with the changing times, and stay relevant.

“Relevant, high quality and compelling content will become more significant for brands to connect on an emotional level.”

That’s why, he says, some brands are their own publishers today because in this way they can communicate directly with customers.

Chow says clients, who are still in the early stages, will leverage the agency support model, but this will still need concentrated management to ensure the content is relatable and authentic – and agencies who fall short of really telling compelling stories on behalf of their brands risk becoming irrelevant.

In this sense, brands will need to move fast to build the in-­house resources and capabilities required to be a publisher, manage their content and be a storyteller, he says.

Brands need to jump in the driving seat when content marketing is concerned.

However, building a content team in­-house can be challenging – finding the right people is a challenge and the investment costs are high, he admits.

The “in-­house agencies trend” doesn’t stop here, however, especially in the FMCG industry.

In May, PepsiCo strengthened its media and content creation division with the opening of its own in­-house studio in New York.

Dubbed the “Creators League”, the 4,000-­square foot content studio aims to pump out branded content while also pursuing distribution deals with film studios, online publishers and other outlets for brand­agnostic content.

The future of the traditional agency model has been the subject of much debate in recent years. PepsiCo president Brad Jakeman, who launched the in­-house hub, constantly urges brands and agencies to “evolve” their relationship.

He recently stated the traditional model is “going to break if we don’t really think about how to innovate”.

In a recent report in July, Jakeman mentioned that “instead of five pieces of content a year, a brand like Pepsi needs about 5,000 pieces of content a year”.

He believes agencies often struggle to work consistently at this kind of speed in a way that is both affordable and sustainable.

Unilever is also jumping on this trend. In October, the consumer goods giant was reportedly planning to launch two units dedicated to branded content in a bid to overcome ad blocking and change consumer search behaviour.

Under the new project, it will create “U-­Studio” and “U-­Entertainment” – the former will concentrate on “needs content”, which includes how­-to videos, reviews and user-­generated content; while the latter will develop “passions content”, including games, TV series and music created with partners in the entertainment industry.

On the agency front, many are aware of this trend and point out it’s not new in the market or even surprising.

In fact, they admit there is certainly a need to evolve in terms of capability to adjust to the evolution of the media and the strong role of digital.

Tze Kiat Tan, CEO of BBDO Greater China, says it’s true that some clients are taking some elements of the marketing service in-­house.

She explains the reason for this is simple: fast, good and cost­-efficient.

“In every campaign for every client, there is room for precisely this kind of (cost-­effective) content – most of which comes from small outfits or indeed in-­house studios.”

However, she says, very often brands come to famous agencies such as BBDO looking for more than just a “good” production.

They usually come to us to provide higher value services – strategy, big ideas and integration expertise.

“They don’t want to merely have ‘good’ stuff from BBDO. They expect ‘great’ stuff.”

Tan says she is still very confident about the future of the traditional agency model; as long as agencies continue to cook up ideas that can change both markets and culture, it will look bright for the business.

“Ultimately, it means we need to retain our high­ground on strategic thinking, creativity, and integration – thereby allowing us to develop work that people really talk about.”

Echoing Chow’s earlier opinion, Catarina Lio, chief operating officer of Ogilvy & Mather Hong Kong, doubts if brands have the right environment to build and sustain the talent for their in-­house teams.

Trends always change – the talent you have today may not be the right fit two years down the road. Who will make the right decision to evolve or adapt? Who will help to train the talent?

When it comes to the modern communication environment, things move from print to digital, from normal search to voice search, as every day is changing, and she believes “agencies need to rebuild the model to create trends in order to build trends”.

She says moving ahead, she still believes that agencies have the advantage because they understand the depth and breadth of market trends – across many industries, not just one.

“This also means we have a quicker learning curve because we are exposed to more channels and more industries. We may hit the wall, but I believe we learn faster this way.”

For the relationship between the agency and the client in the future, she says the key is to mix the best talent to form the right team to best partner its clients.

The most appropriate model is greater transparency with clients.

“The modern way is about listening and learning from consumer insights to co-­create a content/brand experience that keeps consumers coming back.”

Caspar Schlickum CEO of Wunderman APAC, thinks the always­-on real-­time marketing ecosystem is challenging brands to rethink how they approach the way they engage with their customers.

And it also challenges agencies to rethink what they do for their clients.

“Agencies that will survive are those that are fast and nimble, who are driven by great creative and inspiring content, and who can collaborate with their clients to find inspiration in data.”

But to say that clients can just in-­house all of this is missing the point, he adds.

“Clients benefit from the diversity of ideas and thinking that their agencies bring. They benefit from having people working on their business who are exposed to a very broad set of challenges and ideas, not all of them related to the client’s brand.”

With so many tools, so many channels and so many platforms today, he says the agency can be a valuable window into not just ideas, “but capability and understanding”.

Looking into the future, he says he is firmly in the “it’s evolving” camp when it comes to the client/agency relationship. By embedding some or all of their agency team and capabilities in their own marketing departments, that sort of partnership creates the kind of collaboration that delivers the best of both worlds.

Rather than traditional marketing campaigns, social media has become an important means to engage with customers daily.

Xiaofeng Wang, senior analyst at Forrester, says marketers can take the day­to­day creation of content internally, for example, with owned media such as branded pages or branded social media accounts.

However, marketers can’t do everything internally.

“They still need external support in digital strategy to accelerate digital transformation and deliver business outcomes; creative strategy is among the areas that marketers need the most external support.”

She points out marketers need creative strategies to improve the return on their digital marketing investments.
“Creative strategies include guidance on how the audience will interact with the brand and what the brand can do or say to engage them,” she says.

“Content marketing, creating relevant ideas, defining customer segments, and customer journey mapping are critical to developing an effective creative strategy where the ultimate goal is to deliver business outcomes.”

On the other hand, Wang suggests that agencies could transform from implementation to a business­outcome delivery, more like consultancies that offer both strategies and deliver business results.

She adds that, for instance, digital agencies nowadays are competing with digital service providers such as Accenture Interactive and Deloitte Digital, blurring the lines even further and greatly complicating the future of the status quo.