Growth in the in-housing model has accelerated in Australia over the past two years, with 78% of marketers now working in this way, the latest In-House Agency Council (IHAC) and Kantar report reveals.

The pair have released the '2023 In-House Agency Landscape Report', an APAC research piece focusing on the state of the in-house agency model. It follows IHAC's inaugural study published in August 2021 and aimed to provide an updated perspective on Australia's in-housing landscape, the future of the marketing model, and the influence of generative AI on the creative ecosystem.

As well as overall growth, IHAC Executive Chairman, Chris Maxwell, said 17% of IHA’s have launched in the past two years.

"It's demonstrating that the shift is gaining momentum with adoption of the model growing at nearly double the rate seen in 2021," he said.

Despite this, the report indicates Australia trails just behind the US in terms of IHA penetration, outpacing its European counterparts. The typical Australian IHA comprises between five to 25 individuals and spans seven different capabilities. The data suggests a preference for mid-sized, agile, and hybrid models, with 78% of respondents operating a hybrid model (a blend of in-house and external agency talent).

"With broader remits and continued economic pressures, IHA’s foresee their workloads increasing while reducing the amount of work they procure through external agencies. However, for marketers with an IHA, the list of benefits is long, and goes well beyond just cost efficiency and into better knowledge of brand, speed and agility, along with having dedicated staff," Maxwell said.

Nearly three-quarters (74%) of in-house agencies are anticipating increased workload over the coming year. The report found 93% of marketers asserting their IHA has positively impacted their ability to adapt to recent economic pressures.

Compared to 2021 data, challenges such as managing workflows, recruiting top talent, delivering great creative and expanding capabilities are on the decline. IAHC said further evidence from industry recruiters suggests there is now more top-tier talent looking for roles in-house than ever before.

"Interestingly when we ask marketers who do not have an IHA what they think the challenges may be, the number one perceived challenge is set-up costs," Maxwell continued. "Whereas for those with an IHA, setup costs don't even make the top 10. This suggests that the costs of setting up are immaterial once you’re up and running and experiencing the benefits.”

The report also sheds light on the adoption of generative AI among in-house creatives and marketers. It reveals four out of five marketers are currently exploring the integration of AI into their marketing creation processes. Australian marketers believe AI can streamline content creation, with 51% expressing this sentiment. However, only a quarter believe it will directly result in more cost-effective campaigns.

"It’s an important piece of work to be involved in given the evolving landscape of how organisations and marketers activate their go-to-market strategy and offer," Jacqui Brandt, Kantar Australia Manager Director, commented. "The spotlight on AI is particularly fascinating and we’ve learned that 80% of marketers are considering or already using AI for content creation. While cost effectiveness is yet to be understood, AI is here to stay and embracing AI and seeing it as complementary to the agency toolkit is essential.

"Critically, this report acknowledges the important interplay and role that internal and external agencies play and how best to leverage the strengths of each – be that around the work produced, the way media is planned and bought, and the tools used to inform business outcomes."