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Why Advertising Is Moving Away From Ad Agencies

It’s highly likely that the next ad agency you work with will not be an ad agency.

 

For at least a decade, the ad agency model has been creaking, like a submarine that dived too deep. And now, finally, it looks to be disintegrating.

 

It started with a few small holes, the water began to rush in, and those leaks are now turning into a flood. The only question is whether it will implode suddenly, or crumble slowly.

 

The main trends that have holed ad agencies below the waterline have been in-housing, the rise of hybrid models, and automation.

 

In-housing is really a return to how advertising began. Unbelievable as it sounds, when advertising first started, there were no advertising agencies. Media buying agencies had long existed (the first recorded British advertising agent was one William Taylor, who placed an advertisement touting his services in the Maidstone Journal in 1786) but the first ‘full-service’ agency in the US – that both bought the space and filled it – was N.W.Ayer in 1869. Before that, large advertisers such as department stores and beauty brands created all their ads in-house.

 

Once advertising agencies were invented, they quickly flourished, and by 1906 there were 400 agencies in London alone. Why were clients prepared to pay more, to get their advertising produced by external companies? The simple answer is they were persuaded they’d get better work. And that argument rested on a (true) belief that creative people want to work with other creative people. They want to live in the trendy party of town, and wear exciting clothes that might be frowned on by the ‘normals’. They want to be able to put their feet on the desks, and experiment with facial hair. All of which they felt wouldn’t be possible within a client company.

 

The trend lasted a hundred years, during which in-housing rarely happened. When it did, it was a creative experiment. The most famous example was the work for the Italian fashion brand Benetton, which for an 18-year period (1982-2000) didn’t use an ad agency but instead employed the photographer Oliviero Toscani, who created a controversial (and successful) series of advertisements.


Benetton ad, produced in-house, 1991


The brand that broke the trend was our beloved Apple. For the past five years, their ad agency Media Arts Lab has seen a steady stream of layoffs, as Apple has taken more and more work in-house. But why Apple? Why would the brand that has benefited from arguably the best ad agency creativity in the world, via Lee Clow and TBWA/Chiat/Day, a partnership that produced iconic ads like ‘1984’ and ‘Think Different’, turn against ad agencies?

 

Because they realised they could attract great creatives themselves. In 2016 Apple hired Tor Myhren from Grey, and earlier this year they hired R/GA’s global chief creative officer Nick Law. “The difference between everyone else’s in-house agency and Apple’s in-house agency is talent,” says Greg Paull, principal and co-founder at consultancy R3. “The world’s best are attracted to Cupertino and it makes it easier to develop big ideas in-house.”


And what started with Apple has spread to telcos, banks, and even beer brands. Some marketers start by setting up in-house teams to do the basics, such as banner ads and stadium advertising, but then progress to having their teams produce content and even TV ads.

 

There’s even an advertising agency that specialises in building dedicated in-house advertising agencies for clients. Oliver was founded in the UK in 2004, and now has 2000 staff in offices all around the world. Much of the work they produce is mundane, but not all of it.

 

Oliver’s ad for UK credit card Barclaycard’s Fraud Fighter tool is pretty damn amusing, and has won several awards. It showed fake gorillas in a zoo surprising members of the public by drinking coffee and playing cricket, with the tagline ‘if only all fraud was this easy to spot.’


Barclaycard now begins all of its marketing projects by examining what can be executed in-house rather than through external agencies, marketing director Alex Naylor told Campaign magazine.

 

And the in-housing trend is gathering pace rapidly. From 58% of brands doing some work in-house in 2013 to 80% in 2018, according to a survey by Australia’s Association of National Advertisers. The primary motivation is cost-saving, of course.

 

Luke Wheatley, in-house creative director for international travel brand Flight Centre, explained it like this in an interview with AdNews: “If we go into production for our brand ad, every dollar you see on screen is the dollars that are on screen. It doesn't go to an agency, it doesn't go to a head of strategy that you never even saw - it goes directly to the production company and it's on screen.”

But there’s the advantage of greater control, too. It must be incredibly frustrating for marketing directors to sit in meeting after meeting with an ad agency who are failing to ‘get’ their brand. And all the arguments over logo size and how long the end super should stay up on screen… it gets wearing. There’s none of that, with an in-house agency.


Other marketers are still convinced of the value of external ad agencies, but they don’t see the point in paying for an ad agency and a production company, or an ad agency and a media agency. Hence the rise of the hybrid. These ‘one-stop shops’ offer cost efficiencies and time efficiencies, without sacrificing the external perspective that disappears when you go in-house.

 

And some of these new hybrid models seem to have benefits that spread beyond the clients who hire them. The advantage for directors working at places like Connecting Plots in Sydney, a hybrid ad agency-production company, is they don’t have to pitch on jobs. When a client approaches Connecting Plots, they’re asking them to write the ads and shoot them as well.

 

Many of the digital and social publishers who have sprung up in the last few years, such as BuzzFeed, LADBible, and Refinery29, don’t even use separate creatives and directors – the same person both comes up with the ideas, and shoots them. It’s quite mind-opening. The advertising industry has long been demarcated between people who hold a pen and people who hold a camera, but that distinction may now be breaking down. How long before everybody does everything?


Apple ‘Barbers’, directed by Dougal Wilson via Furlined, created in-house by Apple.

 

Of course, the counter-argument is that a higher quality is achieved by using specialists. But such was the case in the world of Downton Abbey, where it was believed that an upstairs maid could never do the work of a downstairs maid, and vice versa. Or in the world of stockbroking, where you had to call your broker to buy shares, and he would call a dealer. Now they’ve both been somewhat eliminated by online platforms.

 

In fact platforms such as Facebook and Google have taken a huge slice of the advertising pie too, and there’s often no agency involved.

 

Automation is now even expanding into ‘traditional’ media like TV. ‘Programmatic’ TV ad buying enables clients to buy TV ads via a platform, the same way they buy digital ads, and will reach $4.7 billion in the US in 2020, according to eMarketer, which is up 71% from the 2019 figure.

 

Not only can the ads be bought via a platform, they can be created via a platform. The most noteworthy of the new breed of crowdsourced ad platforms is Genero, which describes itself as ‘a video content marketplace for ad makers’. Andrew Lane told Smart Company its time has come. “The traditional agency production model hasn’t really evolved in decades,” he said. Although they do work with some advertising agencies, their model mostly relies on cutting them out. “Some people use the word disruptive,” says Lane. “We prefer ‘alternative solution’.”

 

So advertising agencies are under unprecedented pressure from in-housing, automation, and hybrids. There’ll always be a need for people who know how to create ads. They just may not be sitting in organisations called ‘ad agencies’ for much longer.

 

As Johnny Hornby, founder, chairman and chief executive at The & Partnership, which supplies on-site agency services for brands including Toyota and News UK, told Campaign magazine: “I think we’re only at the beginning of this disruptive phase."    



Cover photo credit: Joe Kiely on ArtStation

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