Dive Brief:

• Nike has dropped its digital media agency, Publicis Groupe's Razorfish, according to a report in MediaPost citing sources close to the situation.
• The athletic gear brand is not looking for a new partner and could instead be building its own in-house agency, according to the report.
• The brand spent more than $82 million on digital media in the U.S. last year, per Kantar data cited by MediaPost.

Dive Insight:

The news that Nike has exited its business relationship with Razorfish coincides with a broader push by the brand to simplify its internal cost structure while doubling down on digital. The brand has been ramping up its Consumer Direct Acceleration strategy, which aims to take advantage of the success the company has seen in digital, as the company struggles with losses in retail, according to Marketing Dive sister publication Retail Dive.

Nike reported a $790 million loss in Q4 2019 as retail revenue fell by 38% globally and by 46% in North America. However, digital sales grew 75% in the quarter and represented nearly 30% of the company's total business for that period. Nike's losses resulted in layoffs that were not attributed to the pandemic, but instead are part of a restructuring to cut costs and reinvest in growth areas like digital, Retail Dive reported.

As the company pivots to adapt to a more digital-first program, it is also looking to cut costs, and axing its digital media agency could help with the bottom line if it builds an in-house team, as it is reportedly doing. In-housing has been a growing trend for brands over the past few years because of its potential to cut costs and provide greater control over marketing. The coronavirus pandemic has only increased pressure on marketers to cut costs, suggesting more brands will look to in-house some of their marketing functions previously handled by agencies. The athletic brand has previously brought other elements of its ad-marketing activities in-house including social media and influencer marketing.

Nike has been ramping up in digital over the past couple of years. In 2019, Nike hired its first global chief digital information officer to bring a consumer focus to its digital operations. It also made two notable digital acquisitions last year. The deal for TraceMe was intended to boost its digital content strategy while the purchase of data analytics startup Celect supports the brand's DTC strategy.

Dropping its digital media agency comes at a time that Nike has been seeing success from its digital marketing. The company's anti-racism ad "For Once, Don't Do It" that dropped in response to George Floyd's murder and subsequent racial justice protests around the world was seen as empowering by 60% of respondents in a recent Ace Metrix study.