‘Where the money is’: There’s a rush to acquire companies offering in-housing capabilities

In December, Martin Sorrell’s S4 Capital made headlines when one of its first acquisitions became MightyHive for $150 million, an agency used by companies like Bayer, Sprint and Nationwide to launch them on the course of bringing their programmatic media buying in-house. This past month has seen a flurry of similar types of acquisitions on behalf of both ad agencies and those working to disrupt the traditional ad agency model. At the beginning of January, You & Mr.Jones acquired Oliver, an agency that embeds talent in-house with the end goal of helping clients become self-sufficient, and it also invested in ad tech company Beeswax, which will help companies bring media buying in-house. A few days after, Dentsu Aegis agency Merkle announced its acquisition of Filter, which offers embedded digital teams on-site.

Advertising experts and execs say to only expect more.

“One thing agencies are very good at is finding where the money is,” said Brian Wieser, senior research analyst at Pivotal Research Group. “Agencies have to buy where they can’t build. At a very general level, that is what is happening. Agencies are always going to find ways to help clients.”

Clients do need help. When it comes to in-housing marketing, whether it’s creative or media buying, marketers face a lack of talent, resources and sometimes the knowledge to effectively do their work in-house, especially when it comes to media buying.

“There’s a clear trend toward in-housing among major brands, and the side effect of that is that agencies need to redefine themselves and the area where they add value,” said Ari Paparo, CEO at Beeswax. 

Merkle’s acquisition of Filter, which is the first time Dentsu Aegis has made an acquisition that supports in-housing, shows that a traditional agency can make the same play, not just those seeking to disrupt the agency model like S4 Capital or You & Mr. Jones.

Craig Dempster, president of Merkle in the Americas, said that while the agency has staffed people within clients’ marketing teams before, the acquisition of Filter allows them to do so at scale. Filter has a network of 150,000 people who work on creative and user-experience design.

“We’ve been really inquisitive and looking for market opportunities that are coming, and not market opportunities that were at scale already,” said Dempster, who said Merkle had been looking into in-housing services for the past year and will continue to grow in the area. “We have clients that see this delivery model as a smart way for them to get resources, and we want to support them.”

The pace of in-housing work is only accelerating. An October ANA study found that 78 percent of ANA members had some form of marketing done internally, compared to 58 percent in 2013. The same study found that within the last three years, 70 percent of ANA members surveyed moved work away from external agencies to do it themselves, especially in the areas of content and influencer marketing. According to Digiday Research, marketers said the biggest benefits to in-housing marketing is having more control over their positioning and data, followed by quicker turnaround speeds and cost-savings.

It seems that right now, marketers are willing to spend to get some control, at least in the beginning. Oliver has a revenue of $150 million working with brands like Unilever, Adidas, Marriott and BMW.

“[Marketers] are under more pressure than ever to do things with speed, efficiency and to improve ROI,” said Anne Bologna, chief engagement officer at media buying agency iCrossing. “That’s why it’s happening. We will see a flurry and frenzy over the next couple of years.” Bologna said iCrossing is going to continue its business model, despite a couple clients recently hiring MightyHive as the first step to in-house their programmatic.

Of course, the return on these acquisitions is difficult to determine. While the in-house movement is strong, there have already been cases where companies, such as Intel and Vodafone have reversed their decision to move pieces of their marketing in-house, citing cost factors, talent and lack of support from top exec ranks.

While some might argue that supporting the in-housing movement is contradictory to their own success, others see it as a necessary move.

“I hear regularly from agencies who have clients that decide to take things in-house and if agencies are doing their jobs well, they make sure the client is aware of the pros and the cons and finding added services to offer them,” said Wieser.