What you need to know:

• Ex-CUB Marketing Director Chris Maxwell is betting on a major increase in brands developing in-house agencies to handle creative and media. His consultancy Lution aims to make it happen.
• Lution founding client Betfair and its Marketing Director Nick Thomas are planning a hybrid model, using savings to pay for high quality creative provided by Bear Meets Eagle on Fire.
• Justin Ricketts, CEO at WPP-owned production house Hogarth, says clients that have built in-house agencies have approached WPP to outsource again, with some quickly saving 50% as a result. He thinks the future is a blend of "onsite, offsite, offshore".
• Leif Stromnes, DDB Managing Director, Strategy & Innovation, isn't sweating the small stuff. He thinks the market is ripe for in-housing - but that high calibre creative is unlikely to be wrested away from ad agencies.

Better in than out?

Far from driving ad agencies to the wall, in-housing models could save them, argue its proponents. Maybe they could even save the world from a flood of content mediocrity while recasting corporate culture from grey and lumbering to agile and fun.

Too good to be true? Not according to Lution’s Chris Maxwell, who has launched an in-housing consultancy on the back of building a 35-strong team at brewing giant CUB. He thinks post-Covid Australia is primed for in-housing action.

DDB’s Leif Stromnes, Hogarth’s Justin Ricketts and Betfair’s Nick Thomas have mixed views on models. But all of them acknowledge that wherever the agency sits, dud content will never drive growth.

Cutting the crap

With DDB for 21 years, Leif Stromnes has seen one or two changes. But fundamentally, Stromnes says DDB remains in business because brands value high-calibre creative and are willing to pay for it. Should post-Covid Australia undergo a wave of in-housing – or whatever else the future throws up – top-notch work will remain a constant, suggests Stromnes.

“The conditions are perfect for in-housing – as they were 15 years ago – and I think we will see more of it because the world is screwed and clients are looking for new solutions,” says Stromnes. “But it’s nothing new. We go through these cycles.”

Neither does in-housing mean agencies are out of the equation. He points to DDB clients such as Coles and Kmart, both of which have “enormous” in-house teams. “We work very comfortably with them,” says Stromnes.

That confidence is drawn from a clear delineation of roles and remit. The two retailers understand what drives growth, suggests Stromnes.

“I think Coles retained DDB because they want some of our creative magic and they think it is worth paying a premium for,” he says.

“They could get their in-house team to do that [big creative work] for them and it would cost a lot less. But they are willing to pay a premium because they think they can get accelerated growth.”

Which is why Stromnes thinks agencies will remain in demand, in-housing surge or otherwise.

“We have no qualms whatsoever [about clients in-housing teams] and work very well with a number of them. But we are growing because we have managed to convince brands that it's worth paying a premium for above average creativity that accelerates growth,” he says.

Stromnes thinks winning that argument is central to advertising’s future.

“The only thing I can sell is our ability to help clients grow disproportionately; to grow unfairly, by deploying this thing called ‘creativity at scale’ and moving people to action.”

Paying Paul

Chris Maxwell built a significant in-house agency as Marketing Director at Carlton & United Breweries (CUB). He’s now now driving specialist in-housing consultancy Lution and anticipates major growth if the firm can convert even a fraction of apparent market appetite.

But Maxwell agrees in-housing models are far from exclusive, coming at the expense of another party, and suggests they could ultimately end up putting more cash into ad agency coffers.

CUB was “great at building brands” but had largely missed the boat on digital says Maxwell. Concerned about fragmented agency relationships, stagnation and IP leakage, he built the business case for what became a 35-strong in-house team.

It paid dividends. By in-housing programmatic media, the brewer “very quickly made gains in the range of 30% on cost and another 30% in effectiveness,” says Maxwell.

Yet in-housing should not be seen as a paring knife. Maxwell says smart, marketing-led brands will recycle savings to fund better quality creative that drives growth.

Betfair aims to take that approach. The betting exchange is building an eight-10 person internal agency, while also partnering with creative shop Bear Meets Eagle On Fire, among others, to deliver brand building projects. Lution is helping to bring the hybrid project and partners together.

“There are certainly effectiveness and efficiency gains to be had by bringing capabilities inside the organisation. But there's always going to be need for external, diverse, creative thinking and creative ambition to come in and help out on different things,” he adds.

“That’s the model Lution is trying to build – let's have the most efficient and effective way of doing 80% of the ‘churn and burn’ of marketing so that when those big projects come up, you've freed up budget to invest in the right capabilities and the smartest people to do that work.”

Horses for courses

Betfair Marketing Director, Nick Thomas, hopes its hybrid approach is going to deliver the best of both worlds for the firm, which in Australia employs about 120 people and is owned by James Packer’s Crown Resorts.

“All of our media and creative has been done internally for the last couple of years,” says Thomas. “We’ve only had a couple of people doing our digital media buying, but we quickly saw a three-to-five fold improvement in digital media buying effectiveness when that was brought internally.”

Under its new model, Betfair will also work periodically with indie media shop Speed as well as Bear Meets Eagle On Fire on its new customer and brand strategy.

“I’m a huge believer in the hybrid model," says Thomas. "We want to make sure we have access to some of the best talent for those disproportionate moments of importance.

“But I don’t think it makes sense for us to ask that talent to do the versioning and owned media integration. It's not the best use of our money, frankly, to be paying the best agencies to do smaller, execution-only stuff, which is why we will have an internal agency working with external talent.”

Speed will handle broadcast buys when required, with Betfair handling digital media internally.

“Speed will get access to better rates than us, and they have more capability. Plus we're very calendar driven – wagering is predominantly linked to the sporting calendar – so we have these big moments when we need to be more visible."

As for the rest of the time, he states that the firm is not “spending double digits of millions a month on broadcast media, so we don’t need to have all of that capability internally," adding, "but we do need access to it."

Content crisis

Justin Ricketts, CEO of WPP-owned production house Hogarth, thinks the market may be entering a post in-housing phase. He claims brands – including WPP customers – are making major gains from outsourcing their in-house teams. Ricketts calls that trend ‘on-siting’ and suggests it is a key contributor to Hogarth’s growth against a backdrop of wider market decline.

But he thinks the scramble to find new models is ultimately driven by a “content crisis”; a tsunami of mediocrity driving people to ad-blockers and ad-free subscription services.

“The reason for our growth is clients have a big problem. They've got to create better content faster, smarter – and more of it,” says Ricketts.

“The better it is, the more impactful, the more effective. But a shitload more content is needed,” he adds. “There is an efficiency play in terms of speed and cost, and marketing budgets are consistently stretched. So there is a big content crisis – and the reality is that legacy models are broken. They can't solve that problem, so change is needed.”

In-housing in reverse?

In-housing is one solution, but some brands are starting to realise its limitations. Ricketts believes the in-house trend is actually in reverse.

“Clients that have tried in-housing are now coming to us to onsite people to support those teams in a fully integrated model where you've got onsite, offsite and offshore.”

Ricketts thinks only businesses with global scale can solve brands’ underlying content problem by “chasing the sun” and integrating global resource to deliver cheaper but better quality work.

Ultimately, he believes “content creation or production will get decoupled – and I think it will increasingly be managed globally, not locally, not in silos”.

He claims some brands are coming around to that view.

“We have had two clients in this market that have outsourced their in-house teams and within 12 months, we're delivering better quality output, 50% cheaper,” says Ricketts.

He accepts that claim “might seem odd, because we are obviously an agency that makes money,” but insists scale, talent and technology are key enablers.

“I don't think siloed humans inside a client are going to be able to deliver faster and cheaper than a scale operation that uses best in class technology and innovation,” he suggests.

For all that, however, he acknowledges that “there is absolutely benefit in having the right resources in proximity, integrated, enabling brands to retain talent”.

Culture club

Attracting and retaining top talent is a key challenge in all industries – and creating the right environment within a corporate for creative people to flourish can be tricky .

Stalwarts such as Stromnes think this is what sets agencies apart.

“I think the culture of agencies is the most precious kind of commodity we've got,” says the DDB lifer. “It doesn't matter what we're delivering, if we lose that X factor, I think we're out of business.”

But Lution’s Chris Maxwell believes it can cut both ways. At CUB, he says the in-house agency has sparked a welcome change in the broader business culture.

“At CUB, we wanted that agency to have a more energetic, agile, fun and diverse culture. And we liked the fact it was coming to sit on the corporate marketing floor at CUB – and permeate the floor and generate that energy and culture outside,” says Maxwell.

“It was hugely beneficial, to the point where you've got people from around the organisation saying, ‘How do I get in that team? How do I be part of that?’".

Successful in-housing models, he adds, define their desired culture at the outset – and work hard to build it.

“If you know that culture is important, then setting a vision and designing for that is critical.”

Who wins?

If Lution is right, and Australia witnesses an in-housing boom, does that leave big agencies undertaking the high-end stuff and ditching “churn and burn” ancillary services from their duties, and revenue lines?

DDB’s Stromnes isn’t sweating the small stuff.

“That’s exactly our relationship with Coles, so I am super comfortable with that.”

Neither is he too worried that in-house agencies will usurp the likes of DDB when it comes to the big stuff.

“Love them or hate them, creative awards and effectiveness awards are super important – and there’s great evidence around the correlation between creativity and effectiveness,” reiterates Stromnes.

“I would love to see the day when in-house teams are producing award-winning work at the big shows. Then I will be convinced it is the right model,” he says.

“But I’m not seeing it...yet."