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Agencies are no longer as worried about competing on price or skill set: They're concerned about losing work to clients themselves. More and more companies, like T-Mobile have successful digital content studios and are deciding to move agency work in-house, which has left their former agencies of record shifting gears.
In fact, agencies notched 80 percent of their revenue from agency-of-record relationships a few years ago, with just 20 percent coming from projects. Today, each segment provides 50 percent of agencies' revenue according to Digiday. Rather than feel relegated to short-term duty, agencies claim that projects tend to require fewer resources and take less time to complete, making them as powerful as long-term relationships in terms of bringing in money.
But that's not the only benefit of these in-house moves--a few agencies feel it's better for some clients to make this work internal. "It really is OK for some brands to handle their work in-house," says Matt Cronin, a founding partner of House of Kaizen, which helps companies grow subscriber revenue. "In theory, some could handle it better on their own. The challenge facing them is recruiting in-house experts and building up the resources with the breadth of experience and capability an agency has."
The biggest reasons most companies consider in-house options are cost efficiency and agility. Claude Denton, writer for The Next Web, discussed that brands-ranging from Sprint to L'Oréal--have been disappointed by their agencies' work, spurring them to start their own agencies. "Personally, I don't know any advertiser that doesn't crave quicker response times and more control over performance data and how their ad budget is spent," Denton said.
And in the marketplace, the work that agencies do is becoming more accessible-Facebook Ads and Google AdWords have made projects more approachable and enabled companies to bring in people with the necessary skill sets more easily than ever. The general media marketplace is eliminating specialization; media buying has even eliminated some need for media planners through programmatic platforms.
And the most important part is how this impacts small business. As the trends moves to small, in-house teams it is leveling the playing field for entrepreneurs and small businesses to build nimble in-house teams that help them compete with larger competition.
But that doesn't mean that in-house teams automatically come equipped with the same resources, perspectives, and experiences that agency teams do. In the simplest of terms, these teams can be slow to optimize and innovate, which is an incredibly dangerous position to be in today.
To truly take ownership, these teams have to invest in specific skills.
For brands looking to build an in-house agency arm, focusing on culture--the area they know best--is a good place to start. By identifying candidates whose values align with the company and whose motivations match with the challenges they'll face, companies can increase their chances of finding a long-term fit.
Hard skills can be taught, and many resumes will bleed together because they contain similar sets of skills and tools. Zoning in on the must-haves ensures long-term fits don't fall off a company's radar simply because of one missing skill that's used 10 percent of the time.
There are two qualifications, however, that are hard to teach but necessary for in-house success:
Agency-focused employees should come in with enough knowledge of the field to comfortably share their subject matter expertise with fellow experts. Because they're surrounded by non-experts within the company, they also need to be able to provide easy-to-digest explanations for a non-marketing audience.
To avoid the myopia plaguing in-house agencies, brands have to invest in people who like to solve problems and stay up on current trends in the ever-changing tech world. Rather than expect these team members to think through business problems like executives do, they should be gauged for their ability to think through user or customer problems. This customer-oriented mindset often reaps the largest gains from both a user and business perspective.
But there's another tool that can prove useful: External agencies can be surprisingly helpful in getting in-house agencies the talent they need to get started. Agencies have infrastructures built around acquiring and retaining this type of talent; used to maintaining teams with the agility to meet the needs of varying clients, regardless of turnover on either side, agencies are well-versed in developing a plethora of resources.
The in-house shift makes sense for many companies, but if these brands haven't positioned themselves to overcome the hurdles their agency brethren faced years ago, they'll never find success. By focusing on recruiting--and letting others help them past their blind spots--in-house agencies can combine their skills and their company focus to do great things.
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