State of In-House Agencies: Why They Aren't Expected to Shrink Anytime Soon

In-house agencies increased their reach during the pandemic and many also grew their teams, according to a recent report from the In-House Agency Forum (IHAF). Even as the marketing industry at large slashed budgets to reckon with the pandemic, in-house agencies managed to proliferate at a 7% growth rate since 2019, demonstrating that more brands than ever, a whopping 77%, have an in-house agency, according to IHAF's 2021 Productivity and the Pandemic report, fielded in partnership with Forrester Research. "Even though there was significant contraction economically as a result of the pandemic, in-house agencies grew, which doesn't mean that their corporations didn't get smaller," said Marta Stiglin, an organizational strategist and in-house expert who consults for IHAF. A New ANA Study Indicates That In-House Agencies Struggle to Attract Top-Tier Talent More in-house agencies The numbers indicate that in-housing fared well during the pandemic compared to the broader marketing industry. Most of companies did not deviate from pre-pandemic plans to expand their talent rosters, and they also funneled more marketing projects in-house. "There was that question mark of whether [companies] would continue to invest in in-house, in a macro sense, in the way that was done in the past," Jay Pattisall, principal analyst at Forrester Research, told Adweek. "What this research demonstrates is that scenario was proven not to be the case, and in fact corporate teams decided to continue to invest in internal resources." About five months before the pandemic, Aleka Sansom joined Vanguard as its executive creative director. Soon thereafter, she helped the company launch its first in-house agency, coined Red House Creative, pulling money from external creative vendors and using it to strengthen Vanguard's existing creative services team and hire more employees. "We stopped the investment externally. We took that money and we reinvested it in ourselves," she said. She regards Red House as a full-service agency, with the notable exception of media operations, which Razorfish continues to manage for the brand. Talent rosters on the rise In-house agencies are also getting bigger. 47% of them said their team's size increased in the last 14 to 16 months compared to 38% who said their team remained the same size and only 15% who said their team decreased in size. A surprising 73% of respondents said that the changes to their team's size were not specifically triggered by the pandemic. This, Pattisall said, is because plans for expansion were already in place for many before the pandemic began. And while Covid-19 wasn't entirely responsible for the burgeoning talent rosters, ballooning teams do correlate with thousands of pandemic-induced furloughs and layoffs at ad agencies last year."As employees were being furloughed on the agency side, it's entirely likely that the in-house teams were benefiting from some of that talent," said Pattisall. "Some of these people went to other careers, some of these employees are simply re-discovering some life priorities, and without a doubt some of them have gone client side." Even before the pandemic, the agency world was experiencing an exodus of high-profile talent, including Publicis Groupe's Nick Law (who joined Apple in 2019), and Scott Donaton (who joined Hulu in 2019). Since its inception, Vanguard's Red House Creative team grew from 35 to over 100 employees. "We were definitely scooping up talent from external agencies at a pretty quick pace," Sansom said. "Because they are seeing the same type of opportunity to do what they love, but to do it in a corporate environment." In the first year, Sansom increased the capacity of her team by 25%, reduced the cost of external vendors by about 90% and saved the company approximately $7 million in production fees and costs. Higher project volume Even though the pandemic wasn't exclusively behind expanding headcount, 65% of in-house agencies believe it had a direct impact on project volume. And 77% said project volume increased.Higher project volume is related to an uptick in communications materials during the pandemic, Stiglin said. These so-called Covid communications projects might have extended to restaurants that were quickly adjusting branding to account for curb-side delivery options, universities forced to urgently circulate information to students or for hospitals in need of signage. While these pandemic-related projects will likely decrease in the future, project volume may not. "I wouldn't anticipate in-house agencies are going to shrink, but project volume will shift from that unexpected blip in Covid communications for an extended period of time, to something else," Stiglin said. It remains unclear if, as in-house agencies took on more projects, companies simultaneously decreased external agency spend. But 80% of respondents indicated that their company brought marketing assignments in-house and expanded the capabilities of their in-house agency—at least to some degree. Flourishing morale When Vanguard administered its yearly engagement survey to employees, it found that the morale levels of the team increased by 29 points compared to before the Vanguard creative services team formed Red House Creative. "To jump 29 engagement points in one year is almost unheard of," Sansom said. Other in-house teams indicate the pandemic had a positive effect on morale, with 60% of internal agencies reporting morale was either somewhat or very positively impacted by working remotely. According to the IHAF report, in-house teams have greater confidence in their ability to execute on creative—42% indicated their creative platform and concept development process is more efficient today than it was at the beginning of the pandemic, compared to 38% who said there was no change in efficiency, 14% who said the process was less efficient and 6% who indicated that the question was not applicable or they didn't know. Sansom attributes high morale to the shift away from the tactical duties the team filled before it became an in-house agency. More strategic work has made employees happier, she believes. "We gave them the freedom to be the owners of the creative in a way that they just never had been able to before," she said. At Super Bowl 2021, In-House Ads Had a Moment