Digital agencies face ‘big challenge’ as brands increasingly bring work in-house

The percentage of brands taking their digital efforts in-house grew significantly in 2015, according to a new study, leaving digital agencies facing a big question over whether to specialise or consolidate.

What brands want from their agencies

The report from digital society SoDA, which has a stake in the results as it represents the digital marketing industry, found that 27% of brands now claim to work with no agencies for their digital marketing, more than double the figure from the same study in 2014.

Brands are also cutting back their digital agency rosters. Just 12% of brands had four or more digital agencies this year, down from 21% in 2014.

Some 32% of brands worked with just one digital agency, up from 23% in 2014. SoDA says much of this trend is down to brands maintaining digital initiatives such as data analytics in-house and working with select partners on innovation efforts.

A number (27.8%) of brands are working with a small roster of highly specialised agencies in areas such data and user experience while a growing proportion (30.5%) are working with one lead agency for digital and traditional assignments. However while SoDA claims some within the marketing industry are calling for consolidation, it expects both to remain popular.

Despite the challenges, digital agencies remain bullish with 76% saying they are more likely to become the “lead agency”, up 10% year on year, and 80% saying the industry is moving “in a positive direction”.

In part this could be due to the increased spend brands are putting into digital campaigns, with 47% of those questioned saying they are either reallocating budget to digital or increasing digital spend as part of an overall increase in their total budget.

Digital is also receiving heavy investment in areas beyond campaigns, with 65% of brands saying they are putting money into digital platforms, applications and tools and 62% investing in customer insights and analytics. Brands are also increasingly relying on their agencies to provide education and training.

Brands and their agency partners are also “much more aligned” in their areas of value with both picking out “expertise in emerging trends, marketing creativity and customer centred marketing” as the top three areas. Overall they matched in five of the top seven areas, compared to just one in 2014.

However, the report suggests there is room for agencies to provide help in the area of data analytics. Part of the problem comes from the fact that agencies say they are still struggling to understand data, scoring themselves an average of just 5.86 out of 10.

The research, conducted in partnership with Marketing Week’s sister title Econsultancy, used a global sample of 680 split evenly between advertisers and agencies.

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