As the Wall Street Journal reported, angst and anxiety are running high in the ad agency world.
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Fabletics owner TechStyle is avoiding advertising agencies — and companies like it are making ad giants very nervous
Marketers like TechStyle are ditching ad agencies, which should make ad holding companies very nervous. The e-commerce company handles most ads in house.
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Marketers like TechStyle exemplify why ad agencies should be nervous.
The company, which operates fashion brands such as ShoeDazzle and Fabletics, handles the majority of its advertising operations in-house – and has very little interest in hiring any outside agencies. The firm’s “Expert Services” in-house marketing group handles everything from filming and producing ads, to buying digital ad space to tracking and measuring campaign results.
They're not the only brand doing this sort of thing.
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In fact, the 7-year-old company seems to exemplify a new breed of marketer. They see controlling their own data as paramount. They want direct relationships with consumers. And they want to crank out lots of ad messages quickly.
And on these fronts, they find traditional ad agencies wanting.
"It really comes down to speed and innovation," said Laura Joukovski, senior vice president of media and analytics at TechStyle. She sees a philosophical divide in the industry between more traditional big marketers like Procter & Gamble and Unilever and newer, digital-born brands.
Agencies "tend to be the same," she said. They're built to tell people what they want to buy.
But today, "people will tell you what they want through what they respond to in advertising," added. "We're not belly gazing. If that’s the way you fundamentally approach this, you want to be fast."
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Consider that between its four brands, TechStyle pumped out 35,000 different Facebook ads last year, according to Joukovski. That's quite different from the hypothetical big TV marketer accustomed to making two TV ads each year.
In fact, the only part of its ad business that TechStyle outsources is buying TV ad space. Otherwise, the feeling is that there are too many cooks in the kitchen.
"When you have humans in different places working with different rewards you tend to make the process heavier,"said Joukovski. "You don't always orient yourself towards advertising for consumers. It’s not what we love it’s what they love."
Who won't love this sort of talk? Giant ad agency holding companies like WPP, Interpublic Group, Publicis and Omincom. These publicly traded giants have built billion-dollar valuations by amassing huge networks of ad agencies of every type– from creative specialists to media buying shops – all over the globe.
They've been built under the assumption that most big advertisers will need some or all of their services. And most are already facing anemic growth prospects, according to analysts.
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To be sure, for every marketer bringing some ad functionality inside their own walls, there are examples of other big brands either pulling back on that strategy or continuing to move business from agency to agency. But Joukovski sees that changing over time as more web-born companies come to the forefront.
"For many of the digital natives started last over the last decade, this is not uncommon," said Joukovski. But for larger legacy marketers, "change is hard."
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