Dive Brief:

• Dentsu Aegis Network announced the acquisition of Filter, a Seattle-based experience design and digital marketing company that serves Fortune 100 CPG and enterprise technology clients with embedded teams, on-site agencies and fully outsourced solutions. Filter will join Dentsu Aegis’ Merkle agency, which focuses on data-driven, technology-enabled marketing, according to a press release. 
• The company will be known as Filter, a Merkle Company, and will be led by Filter’s current CEO Joe Melanson, who will report to Craig Dempster, president of Merkle Americas. Kristin Knight, the current Filter chairwoman, will be strategic adviser, and Terry Harnisch, current CFO will remain part of the management team. 
• The agency model in which teams are embedded with in-house groups "is gaining traction across many industry verticals and is especially prevalent among the innovation companies, such as Google, Facebook, T-Mobile, Microsoft, and Amazon," said Dave Braun, executive VP, customer experience, at Merkle, in the press release. 

Dive Insight:

The news illustrates how major agency holding groups are interested in working with in-house teams as brands build these on-site resources, sometimes at the expense of work that would have previously been outsourced to an agency. The acquisition was announced soon before Dentsu Aegis Network said it is restructuring its media business in Singapore and cutting 2% of its workforce there, underscoring how the media side of agency work, in particular, is under pressure as programmatic buying continues to grow. P&G recently said it would introduce a new media model to give its brands more control over how they handle their media investments. 

The deal for Filter also arrives around the same time that Beeswax.io — which helps marketers build in-house ad-buying capabilities — announced a new round of funding. Taken together, the Merkle and Beeswax.io news could be a sign that the interest in in-housing will attract investment dollars in 2019. 

Traditional ad agencies have struggled in recent years to adapt to emerging technology and compete with smaller shops. Seventy-four percent of multinational brands are reviewing their current agency arrangements, according to research by the World Federation of Advertisers and The Observatory International. Along the way, in-house agencies are proliferating and the scope of their work is expanding, according to the ANA.

Dentsu Aegis Network also recently acquired full-service digital agency DEG, which will be integrated into the company’s Isobar unit. DEG clients included Purina, AMC Theaters, Fender, Hallmark and luxury goods conglomerate LVMH. 

Customer experience is another area of focus for the Filter deal. CX has been a focus area for Merkle, and adding Filter’s capabilities will help Merkle expand its ability to deliver better-quality customer experiences and meet consumer and client demands. Merkle’s previous acquisition of axis41 was also a move to be more CX-driven.

Most marketers recognize that traditional experiences are no longer enough to satisfy consumer demands, which is creating opportunities for CMOs to think beyond traditional advertising and communications. Forrester predicted that this year, brands will be re-evaluating their marketing strategies to emphasize customer experience and customer technology adoption. U.S. brands have largely remained “mediocre” in the quality of customer experiences offering, separate Forrester research found.