The Great Marketing Migration

While there are numerous reasons why agency businesses are struggling today, the underlying gravitational pull they’re fighting is this: marketing is migrating in-house.

That’s not to say that companies don’t still need or want help from external service providers. Or that there aren’t new and exciting opportunities in the services space.

They do, and there are.

But we’re witnessing a geological shift in the structure of the marketing industry. And the latest data from a study by DataXu, shown above, suggests that it’s crossing a tipping point.

The short version of the story:

In the glory days of Mad Men — which persisted well into the 21st century — the real meat of marketing, particularly in B2C, was in the hands of agencies. They drove strategy, creative, and operations for brand communications in a mass media world. The most important decision a CMO made? Selecting which agency to work with.

While vestigages of that era persist (insert arm waving about the millions of dollars still spent on traditional TV advertising here), the foundation of that model has been steadily crumbling as wave upon wave of digital disruption crashes against it:

• The explosion of digital touchpoints between companies and customers
• The empowerment of those customers through search and social media
• The resulting expansion of marketing from communications to experiences
• The acceleration of marketing’s clockspeed in a digitally malleable world
• The collapse of organizational silos to improve continuity across experiences
• The growing entanglement of product and marketing in a connected age
• The massive marketing technology landscape that enables all of this
• The treasure trove of data generated and leveraged by everything above

To deny these forces or their growing impact on the structure of the marketing industry is to resign yourself to the fate of The Innovator’s Dilemma.

Many of these trends I covered in my booklet, A New Brand of Marketing, a couple of years ago. (You can still download it as a free PDF if you wish — it ambitiously attempts to explain the remaking of modern marketing in a 30-minute read.)

All of these trends contribute to the shift of focus from agencies to in-house marketing capabilities.

Why? Because they’re all interconnected in the gestalt of customer experience.

Marketers simply can’t outsource customer experience wholesale the way they did brand communications.

Experience is too entwined in everything the company does — not just in marketing, but in product, sales, service. It’s embedded into the company’s culture (or, more accurately, the culture is embedded into the experience). It bonds the company’s assets, from soft human capital to hard infrastructure, together into a cohesive whole.

Or at least it does when it’s done well.

Of course, that transformation is neither quick nor easy. Most companies I talk with are still in the middle of that journey. They’re wrestling with the inertia of the past and the unknowns of the future. Few outside of the digital natives (Amazon, Airbnb, Netflix, Uber, etc.) — who had the good fortune of being born this way — have attained this new level of being.

But they’re working on it. And as part of that, they’re recruiting and developing the talent in-house necessary to build experience-led marketing capabilities as core competencies.

Now, I know, this high-level talk of “experience” is all grand and exciting. But can it justify reengineering the marketing budget today, to move agency spend in-house?

This study from DataXu — which you should download a copy for yourself — reveals the real-world justifications marketers are using to move martech and adtech in-house:

The top benefits marketers believe they achieve by moving martech/adtech in-house:

• It’s more cost-effective (top reason for both martech and adtech)
• It offers greater transparency
• It delivers better results on marketing campaigns
• It gives advertisers direct access to their own data

These are pragmatic reasons why more than half of the marketers in this survey report they are expecting to move more martech and adtech in-house over the next 12 months. Only 10% expect to manage less of their technology in-house in the year ahead.

The infrastructure moves in-house. Which brings the data in-house. Which brings the talent in-house. These are all steps along the path to remaking marketing’s internal capabilities. Step by step, the grand journey of the “experience” transformation of marketing is being taken.

The Great Marketing Migration is proceeding apace.

P.S. While I am skeptical of the survival of “agencies” as we knew them, I firmly belive that there are many, many exciting opportunities for service providers in this new world.

In the short term, there is tremendous demand from companies for help with this transition and transformation, which will be a major market for many years to come. Some agencies and consulting firms are having phenomenal success with this today.

Over the longer term, in an age of exponential dynamics, organizations of every kind are likely to seek more specialized on-demand services to better support agile scalability. There are a multitude of interesting opportunities for service providers to blend more data and software into their offerings — algorithmically-enhanced service providers. And there are fascinating models that blend agency services with recruitment and training services into new kinds of talent foundries and human capital renewal centers.

And, of course, there will always been an evergreen field for management consulting.

If we understand where the migration is headed, we can be there to serve it.