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With companies like Hearst and NBC increasingly creating ad programs for themselves and their clients, how will it affect agencies? A panel discusses the issues.
A new advertising trend is emerging which, if it proves popular and cost-effective, could compel ad agencies to rethink their business model and methodology. Many organizations representing a wide variety of vertical markets, particularly publishers and broadcast companies, have opted to create their own in-house ad agencies. Some of these have included Conde Nast, Hearst Magazines, Meredith Corporation, NBC and Reader's Digest.
What does this trend portend to traditional agencies? Are there any strategies and tactics that need to be implemented to keep abreast of these evolving changes?
iMediaConnection asked three ad industry executives to voice their thoughts and concerns. Andreas Roell heads up San Diego, CA-based Geary Interactive, an online marketing agency. Jeffrey W. Hamill, based in New York City, is senior vice president of advertising & sales for Hearst Magazines and manages Hearst Integrated Media, the company's corporate sales arm. John Miller is chief marketing officer for NBC Universal TV Group in Los Angeles.
Here are excerpts from a recent roundtable discussion:
How long have companies been creating their own in-house ad agencies?
Roell: Publishers have always had these types of capabilities since their inception. It mostly started with the fact that some marketers (mostly smaller businesses) did not have any creative solutions available, either because their agency was not focused on a particular media placement or because they may have been too cost prohibitive. So they created in-house agency services to fulfill their specific client requests. The difference now is that some publishers have either created or bought full-service agency capabilities with the objective of taking care of clients beyond their own publisher service offerings.
Hamill: At Hearst we began doing custom marketing and creative work for our clients almost 10 years ago. We were one of the first to approach corporate advertising sales in this manner. I would say that the practice has accelerated since 2003.
Miller: We started the NBC Agency (which now has 225 employees) in the late 1990s and initially did work for MSNBC, CNBC and also created a relationship with Snap.com, which became NBC-I. Our account group also does work for Bravo, Telemundo and other digital properties.
How has this affected ad agencies' business?
Roell: There is an added piece of education and confusion that has been created. We don't mind having to compete with additional agency organizations, yet over the past few years, it has resulted in an additional layer of time that needs to be spent on educating the clients about why we work with a company for their services while they are pitching the account directly, what the value of the agency is, what they get from an agency versus a company-led agency, and how the company attempts to provide services beyond their own offerings. It is an added effort that we are facing as the rate of innovation and complexity about competitive differentiators has already increased tremendously. It is hard for clients to identify the differences from one interactive agency to the next and now we have an additional set of service providers.
Hamill: I think this is more of a reaction to changes in the ad agency business than anything else. As agencies unbundled media buying from strategy and creative there was often a disconnect between communication strategy and media. Publishers, for instance, who have great knowledge of their readerships, are in a strong position to offer insight and advice on how to communicate most effectively in their space. Agencies are now formally asking media companies to help them with strategy and tactics.
Miller: There is plenty of work for traditional agencies and I really don't see too many media companies creating in-house agencies. Every cable and TV operation has some level of in-house work; this mostly relates to on-air promotions or on-air branding because it's easier and cheaper to do this yourself and it is daily and immediate. We do 30,000 spots annually; no outside agency could handle that kind of volume. But it can be quite effective to go outside for certain types of campaigns.