Ad Week: Issues Around Insourcing And Marketers’ Role Fuel Debates

Microsoft U.S. CMO admits to “a lot of angst,” CEO of Advertising Producers Association comments on controversy around in-house production units, and Adobe’s senior director describes the changing marketing function.

The advertising industry is experiencing a period of huge turbulence that is leading to the questioning of traditional models and marketing roles.

On the second day of Advertising Week 2017, speakers grappled with issues such as controversial insourcing of production at ad agencies and the need for marketers to reimagine their roles and how they operate within their company.

This is being driven by changes in consumer habits and the hunger for content in an always-on world.

Transparency Concerns With In-House Units

The issue of in-house production units is an especially hot topic after it was revealed the Department of Justice in the U.S. was investigating agencies for alleged collusion between them and their in-house production units.

While in Europe there is no suggestion of criminality when it comes to the activities of in-house production units, there is still great concern over whether it offers independent production companies a level playing field or clients the best deal.

Steve Davies, chief executive at the Advertising Producers Association, attributes the current predicament to clients “needing more content all the time but with the same or lower budgets.”

As a result, pressure has been placed on fees, and agencies are turning to in-house production to maintain margins.

Davies argued that if an agency invited independent production companies to bid for work, then the agency’s in-house production unit should not be allowed to compete.

“It is entirely up to a client in how they spend their money, but the issue is ‘are in-house units competing fairly?’ and we do not think they do when they bid against independent companies,” said Davies. “You are creating an environment where you are both a player and a referee.”

Philipp Schuster, who works as a marketing procurement specialist at pharmaceutical giant Bayer, agreed with Davies’ referee analogy and said the process “has to be fair.”

He said he would exclude an agency from “judging their own bid” or insist on an independent third party being involved because “conflict of interest is a no-go.”

New Landscape Drives Re-Imagining Of Roles

Insourcing is not only happening in agencies, but also on the client side.

Simon Morris, senior director of campaign marketing, consumer, and SMB at Adobe, highlighted how the always-on nature of consumers in a digital world had led to a restructuring of Adobe’s marketing function.

This has comprised changes including traditional PR managers becoming social marketers and the insourcing of marketing executions at Adobe (the owner of CMO.com).

“We used to outsource all our execution to agencies, which did not work well because we did not have the agility to work quickly,” said Morris. “We’ve now insourced a lot of execution, we still have major agency relationships, but they are much more strategic and long term in nature. All the areas around email, search, and programmatic advertising were in-sourced.”

The Adobe marketing team also now meets with IT, finance, and sales once a week, while a marketing and customer insights group was created to be ultimately responsible for company data to cut out conflict between departments.

“The issue was every function had their own data and interpreted it in their own way,” said Morris. “That caused all sorts of issues, and our chief executive said we needed a single source of truth.”

Grad Conn, general manager and CMO at Microsoft U.S, argued that marketing’s role had changed significantly across the last 10 years because it had gone from being a cost centre to a revenue centre.

Whereas previously marketing budgets were cut first in order to hit earnings targets, Conn said the explosion of tools to measure KPIs means marketers can now “control the revenue” and accurately predict the return they would get on an investment.

Messaging Will Succeed Where Social Has Failed

The definition of brand value has become abstract as desperate bids to capture the attention of time-poor consumers are failing to build an emotional connection, according to R/GA executive director of content Alex Wills.

Wills believes messaging services provide brands with a genuine one-to-one connection with customers and have fulfilled the promise social failed to keep.

“Social promised a one-to-one connection with consumers and conversations at scale,” said Wills. “It has not quite worked out that way, we have to pay to play now, especially with the algorithm in Instagram and Facebook suppressing organic posts from brands.”

R/GA ran a “Nike On Demand” trial in Berlin for the sportswear brand, which attempted to forge a genuine connection with consumers by allowing users to communicate with a range of experts on instant messaging about their exercise regimes.

Wills said the trial was very successful, but the initiative was currently hard to scale because it is labour intensive, but he believes this will change once Artificial Intelligence develops further to take on the role of the experts.

Angst Gripping The Industry

Once again, there was a prevailing sense of angst on the second day of Advertising Week. However, Conn believes marketers can often be their own worst enemy by highlighting how “we love to make stuff up and everyone has a book on marketing.”

He concluded: “We have basically confused ourselves so much. People in marketing have a lot of angst, people are nervous.”

While a lot of worries may be misplaced during a time of disruption in the industry, other areas of angst are justified such as the potential conflict of interests over in-house production units.