The Uber effect on in-housing // Engine plays agency 'Lego'

29 Oct 2018  |  Dominic Mills 
The Uber effect on in-housing // Engine plays agency 'Lego'

The ease of hiring low-cost freelancers is fuelling the rise of in-housing, writes Dominic Mills - but what is this doing to the quality and effectiveness of the work? Plus: Engine breaks down its old model and rebuilds something new.

Another week, and another client takes a chunk of work in-house. This time it’s Honda launching an in-house studio called the Engine Room.

What felt like the thin end of the wedge now feels more like a bacon-slicer effect. The rhythmic and relentless chopping away of small bits of work. A slice of social media here, content generation there, a bit of search, some programmatic media and so on...and then who knows what’s left.

That’s how it must feel, with very little sign so far of any clients changing their minds or hitting the pause button - Vodafone apart, which must be just about the only piece of good news Mark Read has had lately.

Indeed, according to a survey by the US advertiser trade body ANA earlier this month, most of those who have taken elements of their business in-house profess to be delighted with the results. Here’s the ANA’s summary.

I’m a little surprised by a couple of the areas where in-housing is prevalent - creative strategy and media strategy. These are areas where agencies, I would say, are best placed to add value and where an outsider perspective has the most to offer. It’s also where there is a shortage of top talent.

But some of the other areas are less surprising: content marketing, social media, influencers and data and marketing analytics. They either benefit from a short chain of command or there are plenty of people - cheap grads, for example – who can do an ok job.

And this is where what you might call the Uber effect comes into play or, as US commentator Cory Treffiletti described it, the gig economy. In a nutshell, these days it is dead easy to pick up people – at low cost – who are happy to work freelance or on a contractor basis.

They may be grads, they may be more experienced people between jobs, they may be people who choose a flexible work option, they may be returning mums, or they may simply be people burned out by full-time agency life.

Whatever, they are in plentiful supply and they are capable of doing a job and, if necessary, adapting to the inevitable peaks and troughs of such work.

Even if advertisers do not want to hire them direct, they can work through the likes of The Liberty Guild.

But you need to take the ANA report with a large pinch of salt. All told 99% of those surveyed (412 in-house marketers) said they were ‘satisfied’ (79%) or ‘completely satisfied’ (20%) with their experiences.

Yes, that means only 1% – er, 4.12 people – were less than satisfied by their in-house agencies. FFS, even Vladimir Putin doesn’t get 99% of the vote.

In a way, we shouldn’t be surprised. The people surveyed are the people who we must assume pushed to go in-house. So they are hardly likely to confess to anything less than satisfaction.

It gets even dodgier. You might wonder how they judge their satisfaction. Since the most common reason for going in-house, according to the ANA, is to save money – euphemistically described as ‘cost efficiencies’ – we must assume that that is the basis on which they measure success.

Right, no mention of quality of work or, god forbid, effectiveness. Shabby really.


So long WCRS, Partners Andrews: hello ‘Lego’ agency

Like many in the industry, I was both shocked and saddened that Engine is to drop the names of its two best-known subsidiaries, WCRS and Partners Andrews Aldridge, from next year.

But not entirely surprised – by which I mean so slight on either of the shortly-to-be-deceased agency brands. The sad fact is that it’s a sign of the times, and the defining word of our times is ‘integration’.

Although Engine did not specifically use that word to explain the move, it’s what it meant. This is what it said: “Clients need smart solutions that span disciplines and require different capabilities assembled in new ways. The changes we are proposing are about bringing people and capabilities together to meet that client need.”

Since the word ‘horizontality’ is now discredited, we’re going to stick with ‘integration’.

In simpler times – i.e. pre-digital – it was relatively straightforward for agencies to define themselves as much by what they didn’t do, as what they did. Thus WCRS did advertising, and it didn’t do direct, CRM and shelf-wobblers. Partners Andrews (sort of) did the latter, but it didn’t do advertising.

But nobody wants just an advertising/direct/digital-only/CRM solution any more. They mostly want the lot and they want to buy it from one place – the so-called ‘one throat to choke’ principle.

So, as we stand now, agencies have to pretend to be able to do everything. But we all know they can’t, so the lines need to be blurred or knocked down.

To stretch the analogy, it’s a bit like an idealised version of Lego. You can smash down your original model and re-assemble the bricks as you choose. Some will be small, some large, some blue, some red, but they all fit with each other.
That’s the theory. Of course if the bricks don’t fit you’re in trouble.

There’s one other change too. With few exceptions, agency brands don’t mean so much anymore. Time was, we all knew what WCRS stood for. In its defined world, PAA had a clear meaning. It was a smaller world, and your average CMO knew what they were buying with WCRS.

Now, thanks to the passage of time, the changes in the eco-system and the rapid turnover of CMOs, they don’t anymore. Hence the need for change.

I’m going to stick my neck out here: 2019 will be the year of ‘right-structuring’ of agency groups, and more well-known names will disappear.


I’m sharing the WPP pain – and it hurts

It was only 9.00am last Thursday and I’d already had three jeering messages. After a problematic trading update, WPP shares had dived 20%

It was some ‘friends’ wondering if I’d sold the WPP shares I bought a few months ago, although what they were really questioning was my sanity.

WPP's share price over the last 6 months

The answer is that I haven’t sold them. I’m sharing the pain and it’s not a bundle of laughs.

I confess that when I bought, I thought the shares were at or near the bottom. And so it proved till last week – they bounced around at marginally lower prices than I had paid.

But not now. They’ve fallen off the cliff. Aaargh.

But I’m going to hold on. Bad as they were, they suggest a WPP-specific issue rather than a structural issue with the industry, judging by the recent results of Omnicom – sort of ok - and IPG – really quite good. Nonetheless, I’m not suffering from irrational exuberance here – there is no avoiding the fact that the industry has issues.

Here’s what my bet is based on: at the moment, the share price says WPP is worth less than the sum of its parts. But I disagree. Either Mark Read fixes things so the market changes its view, or he is forced to break WPP up, in which case selling off the bits raises tons of cash and lifts the share price. Who knows, he might even play agency Lego.

And that, er, is the theory I'm hanging my hat on.

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JonWilliams, Founder, The Liberty Guild on 30 Oct 2018
“Dom. I love your column. And you name checked us. So firstly thank you. But the association wasn’t quite accurate. Specifically we’re not an alternative to in-house operations. 85% of what we do is direct to global clients, delivering a higher quality lower cost alternative to the traditional agency model. 15% is as a complement to in-house teams. They do a great job. But we do a different one. We work alongside them and bring creative and strategic freshness and firepower where needed. Project based. And then get out of the way and let the team continue to do a cracking job for the client. I think you’ve got to remember that all the disruption in the market is an indicator that all is not peachy. Clients want to work in a more effective way now. World class talent, which is scarce, wants to work in a different way as well. And our success has come from knowing how to connect the two using technology.”
ChrisArnold, CEO, Creative Orchestra on 30 Oct 2018
“In the One to One Economy, who needs middle men? Dominic is right, agencies need to restructure to meet changing client needs and stay relevant. I also agree that we will see some big crashes in 2019/20 and a general downturn in income and profits, which will hit the big media groups hard. Not a time to invest in media groups like WPP. Clients can now do more of it, add to that software and AI and there's simply less to put out to the industry. The days of great creativity have gone, as technology promises greater targeting and greater relevance (though we all know most of it misses by miles.) Media agencies will soon be irrelevant. Most clients have torn up retainers too, so now you really are only a s good as your last campaign. Agencies will reduce to hubs that build teams of freelancers. The new emerging agencies/consultancies will be the specialists. Those that can deliver something clinet generalists can't. For example, community marketing (B2C2) - there's only one specialist in the UK (Connect 2). Also specialists in technology who own the tech/programming - lots emerging like Phasee. It's going to be a time of radical change. But those who are agile adapters will survive.”
DraytonBird, Founder, Drayton Bird Associates on 29 Oct 2018
“Ah: now we know why so much copy is by people who know nothing about the art of persuasion and so few layouts relate to how people look at things. Pay peanuts, get monkeys, right? Go in house, get introverted thinking - and in the end poorer results. Results? Look at the click-throughs, not the sales - and we won an award. And so it goes.”
johnmcgeough, Commercial Operations Director, Global on 29 Oct 2018
“You are right to point out how the ANA in-house survey illustrates the primacy of simple cost efficiencies in the process rather than effectiveness, but the report doesn't reflect quite such an Orwellian level of approval as you say - the 79% Satisfied includes 20% who are 'completely satisfied', they aren't additional to the merely 'satisfied'.”

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16 Nov 2018 

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