OCTOBER 2018THE CONTINUED RISE OF THE IN-HOUSE AGENCY2 / The Continued Rise of the In-House AgencyTABLE OF CONTENTSBackground and Methodology . 3Executive Summary . 4Conclusions . 6Detailed Findings . 8More Companies Now Have In-House Agencies . 8Many In-House Agencies Are New . 9Workload Has Increased . 10In-House Agencies Provide Multiple Benefits . 11Cost Efficiencies Are Primary Benefit .12Satisfaction with In-House Agencies Is High .13Strategic Services Handled In-House . 14Creative Services for Traditional Media Handled In-House .15Creative Services for Digital Media Handled In-House . 16Media Planning and/or Buying Services Handled In-House . 17Specialty Services Handled In-House .18Benefits Differ Among Services Handled In-House .19Satisfaction with In-House Agency Services .20Working with External Agencies . 21Workload: In-House vs. External Agencies .22Business Moved from External Agency(ies) .23Strategic Services Moved from an External Agency .24Creative Services for Traditional Media Moved from an External Agency .25Creative Services for Digital Media Moved from an External Agency .26Media Planning and/or Buying Services Moved from an External Agency .27Specialty Services Moved from an External Agency .28New Services Provided .29Programmatic Capabilities In-House .30Video Production In-House . 31Age of In-House Video Production .32Deliverables for In-House Production Team .33Number of Total Current Staff .34Number of Full-Time Staff .35Make-up of Employees by FTE, PTE, Freelance .36Make-up of Employees by Function.37Billing Method .38Evaluations.39Top KPIs .40Industry Awards . 41Changes .42Biggest Challenges .43In-House Agency Budget .44Appendix: Detailed Charts . 47Appendix: Email Invitation .55About the ANA.563 / The Continued Rise of the In-House AgencyThe ANA surveyed our membership in August 2018 on the topic of in-house agencies. The survey went to the broad ANA membership of client-side marketers (i.e., not agencies or media companies) without prior knowledge of whether they have an in-house agency. Four hundred twelve respondents participated. The ANA also surveyed membership on in-house agencies in 2008 (10 years ago) and 2013 (five years ago), so the current research provides a unique and consistent benchmark on the evolution of in-house agencies. Demographics for respondents: 52 percent are “senior marketers” (director level and above), 48 percent are “junior marketers” (manager level and below) 56 percent have over 15 years of experience working in marketing and/or advertising 41 percent are business-to-consumer, 16 percent are business-to-business, 43 percent are both 75 percent had a 2017 annual U.S. in-house agency budget (staff and expenses) of less than $25 million and 25 percent were greater than $25 million. That budget increased versus one year ago for 51 percent of respondents, remained the same for 37 percent, and decreased for only 12 percent. The complete survey questionnaire is here.BACKGROUND AND METHODOLOGY4 / The Continued Rise of the In-House AgencyEXECUTIVE SUMMARY1. In-house agency penetration is rising and workloads are increasing.78 percent of ANA members have an in-house agency in 2018, versus 58 percent in 2013 and 42 percent in 2008.For 90 percent of respondents, the workload of their in-house agency has increased in the past year, including 65 percent for whom the workload has increased “a lot.” 2. For 44 percent of respondents, their in-house agency was established within the past five years, contributing to the recent rise in overall penetration of in-house agencies. 3. In-house agencies provide a range of services, including strategy, creative for traditional media, creative for digital media, and media planning/buying. Service that have grown significantly over the past five years are: Content marketingCreative strategyData/marketing analyticsMedia strategyProgrammatic mediaSocial media (both creative and media) 4. Top benefits of in-house agencies are:Cost efficienciesBetter knowledge of brandsInstitutional knowledgeDedicated staffSpeed, nimbleness 5. When asked to identify a single primary benefit of having an in-house agency, cost efficiencies was top ranked by a wide margin. 6. Overall satisfaction with in-house agencies is high 79 percent are satisfied, including 20 percent “completely satisfied.” 7. Ninety percent of respondents also work with an external agency(ies). For those respondents, an average of 58 percent of all the work for their company is done in-house. 5 / The Continued Rise of the In-House Agency8. Over the past three years, 70 percent of respondents have moved some established business that used to be handled by their external agency(ies) to their in-house agency. Top services moved have been content marketing, social media, and influencer marketing. 9. Thirty percent of respondents have in-house programmatic capabilities. 10. Seventy-nine percent of in-house agencies have in-house video production capabilities; 49 percent established their in-house production capabilities within the past five years. 11. Top KPIs used to assess the effectiveness of in-house agencies are cost savings, speed to market, and business performance. 12. The biggest challenges for in-house agencies are related to managing growth. Specifically, the two top challenges are managing workflow (increased projects) and scaling efficiently/managing resources.Executive Summary6 / The Continued Rise of the In-House AgencyThe explosive growth of in-house agencies is one of the most significant trends in the advertising and marketing industry today. In addition to the findings in this report, there is regular news in the industry trade press about marketers who have taken services in-house. Recent examples are Philips1, GlaxoSmithKline2, JPMorgan Chase3, and Revlon4.The reasons that marketers use in-house agencies are now evolving, and traditional agencies must accept this reality and respond. COST EFFICIENCY AND SPEED MORE IMPORTANT THAN EVERMarketers have historically turned to in-house agencies for the benefits of cost efficiency and speed. Cost has always been, and will always be, an area of focus for marketers. Today, due to an increasingly fragmented media landscape, marketers need more content than ever before and require that content to be produced in a cost-efficient way. There has been a dramatic increase of in-house production studios, resulting in more content marketing done in-house.Speed has increased in importance with the growth of digital marketing and social media. In-house agencies can simply respond faster than external agencies, as they have better knowledge of their business and are closer to the internal client.TRANSPARENCY AND DATA NEW REASONS FOR IN-HOUSINGIn addition to the historical pluses of cost efficiency and speed, advertisers are now turning to in-house agencies for benefits related to transparency and data. Transparency issues in the industry have contributed to the growth of in-house agencies. The 2016 ANA report from K2 Intelligence, “An Independent Study of Media Transparency in the U.S. Adver-tising Industry,” found that numerous non-transparent business practices, including cash rebates to media agencies, were pervasive in the U.S. media ad-buying ecosystem. The 2017 ANA report, “Production Transparency in the U.S. Advertising Industry,” concluded that transparency concerns in production exist at multiple agencies and holding companies. Marketers have responded, in part, by taking more media and production in-house. Data/marketing analytics are increasingly being managed internally. The report, “Media Transpar-ency: Prescriptions, Principles, and Processes for Advertisers,” from ANA and Ebiquity, which was a followup to the K2 Intelligence findings, provides recommendations to advertisers on data. A key recom-mendation is that advertisers need to have a data management strategy that affords them control and oversight of their data. More specifically, advertisers should take ownership of data with the unhindered ability to store, access, and use those data sets. Taking ownership of the data would also ensure that advertisers are not paying for data that should already belong to them.CONCLUSIONS1“Theres no need for middlemen”: Philips now works direct with the triopoly. Digiday, September 24, 20182GlaxoSmithKline is taking programmatic in-house. Digiday, September 17, 20183Top Starbucks Exec Joins JPMorgan Chase as Chief Brand Officer. Adweek, September 13, 20184Revlon Replaces Grey with Internal Agency Named The Red House. Advertising Age, September 9, 20187 / The Continued Rise of the In-House AgencyCREATIVE EXPERTISE IS BEING ELEVATED AT IN-HOUSE AGENCIESThe work done by in-house agencies is no longer confined to “low-hanging fruit” such as collateral/ promotional materials and internal videos. In-house agencies are doing much more. There has been a sharp increase of in-house agencies leading creative strategy. Some are now even producing broadcast-quality television commercials. In-house agencies are not seen as simply being “fast and cheap” any more. It is important to note that many perceive creative expertise to be a top benefit offered by in-house agencies, notably in the areas of creative for traditional media and creative for digital media. That should be considered groundbreaking!External advertising agencies have historically been considered to be a bastion of creativity. Now in-house agencies can have significant creative capabilities. AGENCIES HAVE BEEN INCREASINGLY DISINTERMEDIATED External agencies are still important partners for marketers, even those marketers with in-house capabilities. Ninety percent of respondents also work with an external agency. Yet certainly external agencies have been increasingly disintermediated as marketers have moved more work in-house. For some marketers, traditional agencies are no longer providing the differentiated benefits that marketers want, and both consultants and in-house agencies have grown as a result. Traditional agencies must respond accordingly which includes becoming more transparent as well as finding new ways to work together and co-exist with in-house agencies. Conclusions8 / The Continued Rise of the In-House AgencyDETAILED FINDINGSMore Companies Now Have In-House Agencies In 2018, 78 percent of companies have an in-house agency. That is up dramatically from prior ANA surveys. For the 22 per