The Pandemic is Putting Huge Pressure on Brands, and it's a Rare Bright Sign for Traditional Agencies

For the first time last summer, Splenda hired a social media agency, Max Connect Marketing.

Splenda had always handled its social media marketing internally. But the pandemic increased the need for companies to communicate with their customers on social channels, and the sweetener wanted to keep tabs on what other consumer brands like Taco Bell and Kraft Heinz were doing, said Matt Thompson, the senior manager of social media for Splenda parent Heartland Food Products Group.

"Splenda wanted an external partner to help keep an eye on what is trending on social, see what others are doing, look for creative opportunities, and keep a finger on the pulse of pop culture," Thompson said.

Now, Splenda's team is sticking to social media posts on recipes and internal company messaging, while Max Connect Marketing, in Utah, focuses on reaching larger audiences.

Splenda is not the only marketer seeing the value of agencies these days:

  • J Crew recently hired New York ad agency Yard after handling the bulk of its advertising in-house.
  • Prudential, which does most of its advertising internally, recently started an agency search.
  • Software company Red Hat, a subsidiary of IBM, hired Canadian agency OneMethod as its first creative advertising agency.
  • UniFirst, a supplier of uniforms and workwear, hired Allen & Gerritsen as its first agency since it started in-housing all its advertising in 2003.

While industrywide numbers are hard to come by, Insider spoke to 12 advertisers who said work is shifting back to traditional agencies as they try to stay competitive and cut costs in the pandemic.

The in-housing trend has shaken agencies

It's true that early in the pandemic, many marketers used their in-house teams to adjust their messaging — more bad news for agencies that were being increasingly sidestepped by marketers. Between 2010 and 2020, the number of brands that built or grew their in-house operations rose 68%, Forrester principal analyst Jay Pattisall said.

Phil Case, president of Max Connect Marketing, said he was "very concerned" by the early shift in the pandemic. But recently, he's seeing brands hiring agencies again — in some cases, shifting work from their in-house teams. Case said his agency avoided layoffs and actually grew 90% in the pandemic.

Dooley Tombras, president of ad agency Tombras, said he's currently pitching for six pieces of businesses, two of which involve work from an in-house team.

"In one case, the client took all their advertising work in-house and now they're saying we have to go back to agencies," Tombras said. "Does this signal the death of the in-house agency? Absolutely not. The future is hybrid work."

Brian Dolan, CEO and founder of WorkReduce, a staffing support firm for agencies and brands' in-house teams, said he's seen more brands outsourcing certain responsibilities while maintaining an in-house team.

In-housing can be expensive and time-consuming

While some marketers think they'll save money bringing talent in-house, replicating the work of an outside agency can actually cost more, sources said.

Pattisall, who sees small to mid-sized advertisers outsourcing project work right now for this reason, said managing an internal agency is "time consuming, complicated, and expensive.

"The pandemic may have signaled the end of the march of the in-house agency," he said.

It's hard to recruit agency professionals who may not see a path to elevation within in-house teams — there's typically only one top dog, the chief marketing officer, Dolan said. And recruiting is a cost many companies hurt by the pandemic can't afford.

Many marketers also see agencies as a way to keep up with market trends, media buying and planning technology, and the competition.

"The pandemic has exasperated the challenge that brands already have of staying on top of the marketplace," Dolan said.

Signs don't bode well for agencies, though

Many predict a future where companies will continue to use in-house teams in tandem with outside agencies.

Agencies are still losing business to in-house agencies and the trend is moving to project work, which is not as valuable as longterm contracts, so they could still be hurt in the end.

Leigh Day, Red Hat's VP of marketing communications and brand, said the company chose OneMethod because it worked well with its in-house team. She said OneMethod produces creative projects that Red Hat can't manage on its own.

"There are 200 to 300 people in charge of projects through our partner initiative," Day said. "Being in charge of 200 to 300 people's requests is a pretty tall order, which is why we needed a partner."

Even big in-house teams have agencies they work closely with.

Anheuser-Busch's agency Draftline teams up with agencies but also competes with them for certain projects, according to people with direct knowledge.