Dive Brief:

• More than half (57%) of surveyed multinational marketers have established an in-house creative agency, and the trend could be accelerating under the coronavirus pandemic, according to a new report from the World Federation of Advertisers (WFA) and The Observatory International.
• Seventy-four percent of internal creative teams have been set up in the past five years, with 82% of that group reporting their workloads have increased in the past year. Rather than resulting in cuts, the health crisis has contributed to an uptick in in-house creatives, according to anecdotal evidence cited in the research.
• The news is likely a bad sign for external agencies: Though 95% of respondents said they continue to work with third-party partners, more than one-third (37%) among that group now focus their creative output in-house.

Dive Insight:

The latest report from the WFA and The Observatory International offers another sign that marketers — at least at large, global companies — are accelerating the in-housing of key functions during the pandemic. For their research, the groups polled 53 advertisers that represent a collective $83 billion in annual U.S. media spending.

The demand for digital content is helping to grow scale for in-house offerings, as channels like streaming command the attention of homebound consumers, while traditional channels like TV and out-of-home face severe disruptions. Video production, video and social media are some of the core creative services being handled internally, the report revealed. Among multinational marketers with in-house creative units, 94% have capabilities around digital content — a figure considerably higher than other areas like media planning and buying, where only about half of surveyed marketers have in-house operations.

As more companies look to build out their creative muscles on the brand side, external agencies could take a sustained hit. The pandemic has already resulted in layoffs and furloughs at all major ad holding groups. Even shops well-decorated for their creative output, or that have the backing of deeper-pocketed companies, are grappling with economic fallout related to the health crisis.

Droga5, which was acquired by consulting giant Accenture last spring, laid off 7% of its U.S. staff this week, while independent creative firm Wieden + Kennedy cut 11% of its global workforce earlier this summer. U.S. ad agencies are collectively expected to shed about 52,000 jobs in the next two years, Forrester predicts. The researcher expects these developments will devastate the traditional agency talent pool and contribute to the move in-house as young upstarts seek work elsewhere.

While in-house agencies' ability to attract, retain and energize top creative talent has been questioned by previous research, the WFA and The Observatory International's findings look to provide a counter-narrative. Marketers surveyed by the groups reported staff turnover of just 9% for their internal creative teams, a stability that's potentially reflective of their relatively young stature. Similarly, 82% of respondents said they were either satisfied or completely satisfied with their creative teams' performance.

Elsewhere, the WFA and The Observatory International's survey picked up frustrations that are well-known in the in-housing space. Managing workflow was the most common barrier to success, cited by 62% of respondents, while the prioritization of projects was an obstacle for 52% of marketers. Nearly half (48%) emphasized a desire to expand their in-house creative teams' capabilities and skills, suggesting gaps that third-party partners will continue to fill in the near term.

Balancing work between internal and external agencies was also viewed as a challenge, and marketers often grade each group on a different curve when it comes to metrics like key performance indicators. Some multinational marketers continue to look outside their organizations for large, strategic projects, per the report, while increasingly handling the production details in-house.

Approaches could vary based on the size of in-house agencies as well. Fifty-seven percent of surveyed marketers retain internal shops with 50 staff or fewer, but nearly one-quarter of respondents have units with over 100 employees.