Outsourcing in the advertising food chain
* A common question in communcations is: why outsource if it can be done in-house?
* Understanding specialisation, scale, savings and security is key to answering this question
* Find the right working model and a relationship governed by your own terms
In our industry, we often need to remind ourselves that we don’t save lives. We are in the communication field and, as I like to explain it to my mother: “We sell ads”. The reason behind this intro is that certain topics in the industry are blown out of proportion and, sometimes, we all need to be mature and more objective in assessing our needs.
In communications, typically more on the media side than creative, a common question always arises: why do I need an agency if I can do it in-house? In other words, why outsource?
To help you come up with the right answer, you need to think of four areas: specialisation, scale, savings and security. Assessing these separately is not enough; they need to be thought of both separately and interdependently.
The media industry is one of the most disruptive industries. Big tech players such as Facebook and Google have been trying to reimagine communications. Specialisation is mainly focused around digital. Biddable platforms have made media more accessible but also put huge risks on marketers.
To better understand this first area, you need to objectively assess what it takes to build this specialisation in terms of talent, training and long-term vision. Nobody can debate the importance of a service built in-house and how that brings value beyond the task itself.
Let’s take the simplest example: deciding if you should run your Facebook advertising in-house, knowing you produce your static content in-house. To bring this in, you should have ticked the following:
- Ability to attract a capable team that is knowledgeable and specialised enough to make the most out of the platform
- A team that is curious and advanced enough to tap into technologies that sit on top of these platforms
- An infrastructure and a set of processes that allow this team to connect with your data-infrastructure at large and has the right checks and balances with your content, PR teams, etc.
- Workload management where you can make use of the talent during ups, downs and leave times
- A solid career development plan to keep this specialised talent motivated, knowing that what motivates them might not be your company’s vision or culture
If you tick all of the above, you still need to assess the risks. Does an external agency still outperform your team? And what’s that value? Does your business require hands-on and always-on teams, forcing you to bring it in-house? While agencies tend to underspend in terms of required timing (sometimes driven by fee pressures), they still outperform with their talent and specialisation.
To deliver on scale, you need to have the ability to put both the right effort (talent and resources) to deliver on the set objectives to the fullest and have the scale as a company for it to make sense to bring the service in-house.
The first is quite company-specific and depends on how much the management focuses on prioritising the marketing/IT function. The plan has to be long-term and not only to worry about today. I’ve seen situations where advertisers were overconfident in building certain services in-house and fell short on maintaining it. This issue accentuates when you start thinking about different geographies or additional specialisation.
The second is to better understand how your scale enables you (or not) to get the most out of a relationship with your suppliers.
Nobody can debate that it’s a complex food chain ecosystem. The advertisers are the primary producers and what takes place between the consumers is getting more complicated yet clearer to everybody. What’s key is that the cost of an in-house resource can be much more than one on the agency side.
You might find it hard to believe this on paper, but agencies can use their scale and relationships to find ways to finance your needs. The major savings are typically around commercial and buying. Is your scale comparable to the scale of an agency?
While agency models have evolved, always remember that the inception started with the premise of buying clout on behalf of multiple advertisers. Even when you think you have the scale, negotiations on a bigger set of advertisers plays a role and creative negotiations can leave you speechless sometimes.
From a tech perspective, the core efficiencies rely on the tools and licenses that agencies acquire on behalf of their clients: whether it’s not charged or passed on at a lower fee, the efficiencies are still sizeable.
Data is becoming the backbone of every buy and layering first-party data on top of these buys is becoming the norm. As an advertiser, you need to think about the customer data you sit on.
Security was never a stopper for advertisers to share their PII data with the tech companies and it shouldn’t be the case with any partner you deal with. Processes and contracts can protect your data. The rule is always to own your customer data but never let that stop you from letting your partners access it. Strict rules and regulations have been in place to make sure everybody adheres to the guidelines.
Outsourcing is not an advertising-specific dilemma. Every vertical and every service within every vertical is always outsourcing. There’s also no shame or a lack of capability from either side when an advertiser decides to bring a service in-house.
It’s key to think objectively about your needs on the long run and assess accordingly. Agencies (traditional or the new breed) will play a more pivotal role moving forward. The complexity of tech, data, inventory and content, among others, means it makes sense to give it to a partner where it is their backbone.
Bringing the expertise in-house is invaluable in elevating your whole organisation: from knowledge to energy and cross-pollination. Whether you outsource or not, this should be the premise of your relationship with your agency. When you elevate it to a true partnership and let them into your bedroom, you will get the best of both worlds.
If your business needs your communications team to be embedded in your core team, don’t shy away from asking for the experts’ advice. Luckily, we’re seeing more and more consultancy asks coming from the commerce players that only care about delivering business results and have found that balance of running in-house with the experts, shedding their knowledge along the way.
You need to find what’s right for your business – find the right working model and a relationship governed by your own terms. Remember, you’re the producer in this food chain. Stay focused on the real objective.