What you need to know: 

• Latest data from the In House Agency Council (IHAC) suggests in-housing continues its trajectory – 78 percent of marketers polled say they now have some form of in-house set-up.
• Meanwhile, the data found brands are siphoning more work away from their agencies, with a 70/30 volume split in favour of in house teams – a complete flip in two years.
• Creative agencies are on the front line of the trend, with high volume production work – “the manufacturing part of the mix” as The Hallway’s Jules Hall puts it – most likely to shift in-house.
• Some agency bosses reject the numbers. The trend is definitely there, they say, but nowhere near those levels.
• Half Dome's Joe Frazer and Hardhat's Dan Monheit think IHAC's numbers may be inflated by how busy marketer's perceive their teams to be. But IHAC executive chairman, Chris Maxwell, stands by the data. He says it points to a “growing trust” in increasingly capable in-house agency teams.
• Other agency bosses questioned the sustainability of some in-house models, suggesting in-house teams lack quality control, leading to overlap and inefficiency, and risk monocultural outlooks. They suggest that for some clients, in-housing might be more of a headache than its worth.
• But agencies are aligned with IHAC's proposition that a hybrid model is the best way forward, with high volume production sitting internally, and big picture creative and strategic work falling to external agencies.
• IHAC's 70:30 ratio suggests that high volume in-house and high calibre outsourced split may already be the norm.

Doubling down

In-housing is by no means new – and given the pressures on marketers to stretch shrinking budgets across more and more channels, allied with the democratisation of tech, brands doing more work internally is inevitable. 

But if the latest research from the In-House Agency Council (IHAC) is anything to go by, the steepness of that trajectory should have agencies a little worried.  

For the latest iteration of its In-House Agency Landscape report, published in November, IHAC partnered with Kantar to survey 142 Australian marketers (at all levels) about their dealings with in-house and external agencies. The sample was made up of 100 online panelists, and 42 anonymous IHAC members.

For IHAC, an in-house agency is defined as “a department, group, or person that has responsibilities that typically are performed by an external advertising, media or other MarCom agency’” – internal PR functions (for the purpose of the report) didn’t make the cut.

What they found was that the “penetration” of in-house agencies had grown astoundingly since they first undertook the research back in 2021 – 78 per cent of marketers said their company currently had an in-house agency, versus 63 per cent two years prior. These figures were based on the online sample only, presumably to avoid skew. When the IHAC members were included, the numbers jumped to 86 per cent (2023) and 67 per cent (2021).

But it's perhaps the reported volumes of work now undertaken in-house that is most worrying for agency bosses and their business models. Per IHAC's survey, marketers reckon they’re now pushing just 30 per cent of the work to external agencies, with 70 per cent handled in house. It’s an almost perfect flip on the share of work reported in 2021.

Agency chiefs are dubious about the stats – they’re seeing workload shift, but say things aren’t as drastic as IHAC paints them to be.

Today the Brave’s Jaimes Leggett says lots of clients are building in-house studios, but “it’s been happening for a while”, and agencies are used to working around it.

Ogilvy ANZ chief, Sally Kissane, is a little firmer in her take on the disparity – she says that at present, Ogilvy hasn’t been seeing “any significant work” shift house. “While levels of in-housing vary from client to client, the IHAC figure is not reflective of anything we are experiencing," she told Mi3.

Role reversal

IHAC’s numbers aren’t an exact science – and there are outliers. Moose Toys, for example, is now reducing the load on its in-house agency – until now, it’s never worked with an external firm.

“Our remit has grown so much [that] now we're the ones who are actually contracting the [external agencies] just to manage our overflow, which is I guess a strange reverse trend,” says the brand’s creative director, Julie Poulter.

On the other end, Bank of Queensland’s in-house shop, The Inside Job, has taken “almost all” of the “design, copy and advertising” work in recent years – though external partners are still engaged for certain projects, says group head of advertising and brand, Stephen Thompson.

He says that’s down to a “long-standing strategic commitment to in-housing the work”, driven by “cost, speed to market and quality”. “All our brands as part of BOQ Group have had stints in the past where external agencies have almost exclusively been used. These days the roles have reversed.”

Then there’s Treasury Wine Estate, which sits more closely to the 70:30 split reported by IHAC. Its in-house agency, Splash, has its own digital media unit handling performance investment. That move, says head of media, Ben Oliver, was a play for better data, speed, and in-house collaboration, rather than cost cutting. “It’s not like you can just bring your media in house and suddenly it’s going to be 50 per cent cheaper,” he told Mi3.

More broadly, Oliver says that while anecdotally the market does appear to move more towards in-housing, the longevity of the trend will all hinge on implementation.

“For me a lot of it comes down to how you execute it rather than the actual business case itself.”

Creative bleed

The creative side of the agency sector tends to be on the frontline of the in-housing trend, though performance media capabilities like that at Splash are also common.

It’s typically the business as usual rollout and adaptation work that’s the first to go client-side – “the manufacturing part of the mix” as The Hallway’s Jules Hall puts it.

The creative skew is confirmed by IHAC’s findings, which rank ‘creative for digital media’, social media, content marketing, strategy, and video production as the top services being delivered by in-house agencies in 2023.

Those services, while not at the core of most creative agency’s offerings, carry valuable margin. Hall’s guess is that “somewhere between 30 to 40 per cent of revenue” has now bled from the traditional creative agency model via in-housing.

That’s forced agencies to double down on the higher margin strategic and creative work, which means a top-heavy structure, which Hall says has seen average age of his agency staff jump to 42 – five years back it was below 30.

Now though, Hall reckons the industry is in the longtail of the trend, i.e. “the worst of the impact has happened”.  

“It's a mega trend at the moment, the pendulum has gone aggressively one way, [but] I think it'll settle back probably near the middle.”

He, and others, note that these days almost every business has at least some kind of internal studio, and agencies have become well equipped to work beside them – though it doesn’t always go to plan.

Real vs. rebrand

Comparing IHAC’s insights to their own observations in market, some agency leaders even suggested that the drastic flip purported by marketers could come down to a general increase in workload for everyone in the industry, suggesting marketers might be blinded by their own team’s busyness.

“Everybody feels like they're doing more of the work themselves,” says Joe Frazer, co-founder of indie media shop Half Dome. “I think half the time it's a bit of a rebrand of what's already been happening.”

Hardhat founder and CEO, Dan Monheit, also wonders if IHAC’s findings are more a symptom sheer volume of work required for a modern campaign. “We’re not making one video to go on three channels anymore,” he quips.

Jen Davidson, managing partner of marketing advisory Tumbleturn Media, is cautious of IHAC’s broad definition of an in-house agency, which might not reflect how in-house scopes are viewed in market. “Many companies have had graphic designers on staff but wouldn't necessarily classify them as an ‘in-house agency’.”

But executive chairman of IHAC, Chris Maxwell, says otherwise, insisting Kantar’s sample were all general marketers, most likely those “who would be briefing” either an in-house or external agency, rather than a member of the in-house team.

“I'd expect this would negate your question about 'busyness' skewing the view, as the respondent has a perspective on both the in-house and external agency and where they're choosing to send the work. So it should be objective.”

Maxwell adds that while the figures are “claimed data”, it’s still “telling” that marketers are perceiving their in-house agencies to being doing such high volumes of work. It speaks to a “growing trust” in increasingly capable in-house agency teams, he suggests.

“I can't speak to the workload of external agencies, but I do hear many reports of challenging economic headwinds and I read a lot of articles referring to people leaving agencies in recent times... but that may be related to broader economic pressures.”

He acknowledges that growing workloads are a driving force behind the in-housing trend, along with the simultaneous rise of AI automation and offshoring.

“It is true that there's more work to do than ever, more channels, more data, more content ... and with budgets flat to declining, marketers need to find ways to do more with less.”

In-house sceptics

Agency leaders are wary of badmouthing in-house agencies – sour grapes put clients offside. But behind the scenes there’s a strong sentiment that in-house agencies just don’t do things as well as their external partners.

In-house agencies if nothing else, are at their core a bid for greater efficiency. But agencies contend that this isn’t always the case, the argument being that corporate work environments don’t command the same level of urgency as agencies. And even if they do, they say that brands will ultimately compromise on the quality of the creative.

Ogilvy's Kissane says that because in-house agencies can’t easily say ‘no’, they end up “bloated”, versus external agencies, which have “a natural commercial tension built into them to keep investing in efficiencies”.

They also rarely have the right “quality control” and lack a “holistic and strategic view of the total communications experience”, she says.

“We conduct communications audits for our clients to evaluate quality and impact of in-house communications and have determined that often a large portion of the work is not having any impact at all,” continues Kissane. “In housing works in some contexts, but unless the right strategy around the customer experience is in place, and the right quality controls and impact measures are in place, it can sometimes fall into a trap of quantity over quality and impact.”

The cost factor, says The Hallway's Hall, might just be in-housing's downfall. Already, he says he’s hearing clients lamented having “inherited the agency’s headache”.

“The volume of assets that are required in a campaign is greater than ever, which has an upward pressure on production costs, which, of course, clients don't like.”

That, he says, will be “the catalyst for pushing the technology forward to automate and reduce cost in that area”. And he reckons that’s where agencies will come out on top – they’ll be the ones with the expertise to drive it.

Chief strategy officer for The Media Store, Sam Cousins, is a little more generous. She says she’s seen both good and bad examples of in-housing.

In one instance, a client successfully invested nearly $20 million in performance media via its in-house team – and Cousins says “clearly defined roles and expectations created excellence”.

She's likewise seen a fair few examples of clients failing to integrate their in-house teams into the broader marketing department – and retreating to an agency “a year or so later”.

Hybrid hope

AI automation could solve a lot of the teething – and volume – issues that can pose problems for in-house agencies, and may yet see current trends accelerate. Either way, there is consensus from both sides of the debate that hybrid models present a happy medium.

IHAC’s report suggests that while the volume of work being outsourced to agencies has “more than halved since 2021”, marketers increasingly view their in-house agencies as a complimentary to their external agency partners. Per the 2023 data, 74 per cent were in this camp. Only 15 per cent of marketers saw in-house agencies as a threat to external agencies, down from 26 per cent in 2021.  

While in-housing is a “smart use of resources” for many tasks, IHAC’s Maxwell says that it’s “not suitable for everything”.

“I'm a firm believer that the creativity, strategic capabilities, and specialised skillsets that great agencies bring to the table will continue to be in demand. But it will be as part of a broader model that incorporates elements of in-housing, external agencies, AI, automation and offshoring.”

Tumbleturn’s Davidson adds that clients “are becoming increasingly aware that creativity is a real skill that requires external expertise”, meaning there’s “a much tighter definition of work scopes defined for in-house versus external”.

Likewise, agencies see their role as having evolved more towards the big picture strategic and creative thinking, or the above the line stuff, in the case of the media investment and high calibre creative.  

“I’ve seen it work best when roles and responsibilities are clear upfront. Often that looks like the creative agency leading ideation and the client studio leading development and roll out,” says Today the Brave's Leggett. 

Meanwhile, Hardhat's Monheit says that his CX and creative firm is increasingly “getting called in for more interesting and more acute opportunities" – read projects – rather than "always-on punch it out kind of stuff”.

The Media Store's Cousins adds that agency strategists play a key role “in integrating all the team to deliver bigger picture thinking and activation”. She says that ultimately, agencies shouldn't view in-house teams as competition. 

"No matter what client you work on there is always an agency village to connect with and we should view an in-house team as part of that village for success, because it isn’t our own agenda that’s important. It’s the client's."