On this episode, I offer up a little perspective on Nik Sharma's newsletter from May 15th, 5 reasons to hire internally vs use an agency"
I want to preface this by saying that agencies are 100% worth using at the right time and place. At Sharma Brands, we tell clients that we like to work with them for 6-8 months and then graduate them. A part of that off-boarding process, many times, includes helping recruit new talent to be in-house. There's no doubt that working with an agency will help build your brand, but for most people who are within the range of $10M to $500M in annual revenue, you should aspire to be in-house for your always-on marketing channels.
Here is why I think paid media should be brought in-house:
No one is FULLY dedicated to your account. If you work with an agency where they don't cap the number of clients they bring on, then you're essentially one of many to-dos's on their plate. The problem with this setup, especially in lower-funnel media, is that you need someone who's refreshing the ad account and testing new things on a constant basis.
The economics don't make sense. I'm always fighting for founders with this email, so as much as my agency friends will hate this, it's true. I remember approving agency invoices for $100k while spending $1M in media and thinking, "What are we doing paying $1.2M a year when we can build our own team in-house for half the cost?" After a certain point, it makes a lot more fiscal sense to bring these needs in-house. If you're digital-only, you'll need 2 media buyers (social + search), a strategist/director, and a coordinator. The argument that the agency sees multiple businesses and can apply shared learnings is usually false, too. How many times has an agency come to you and said "We're seeing this work really well with another brand, and we'd love to test it with you!" Probably once? Maybe never?
You don't own your learnings. One downside to having your digital advertising fully outsourced is that you don't own any of the learnings when they're gone. You don't know why certain optimizations were made, why a specific audience was switched from Cost Cap to Bid Cap, or what worked when Taboola was tested and worked or failed. This is the main reason we don't do any media buying for our Sharma Brands clients... we want you to have the learnings, not leave when we're done in 8 months.
They're not producing creative, landing pages, etc. Media buying is slowly becoming a commodity, and tons of agencies said the same thing this past weekend, too! So, what makes digital ad spend more or less effective? It's everything around it — the software stack, the Northbeam attribution, the HOOX landing pages, the ad creative, the top of funnel marketing, the website conversion optimization, etc. So, remind me again why you're paying 10% on top of your customer acquisition cost for something that's already scaling?
You can do a hybrid approach. You also don't need to go all agency or all in-house — do a hybrid! At Hint, as we transitioned in-house, we worked with Kevin Simonson's agency, Metric Digital (acquired by Wpromote), to support media buying as we brought the team fully in-house. I later learned this was something Metric Digital does to help a lot of DTC brands. Lots of brands will also have digital ad spend in house, and then keep things will less scale outsourced, like TikTok, out of home, podcast, influencer, etc. Another approach is to also have an in-house team with MentorPass credits, where full marketing teams can just learn from other industry experts.
Generally, you don't need to be all or nothing. But at the end of the day, with paid media, it makes sense to bring it in-house as you scale past $1M in spend. If you're spending $10M+ a month, then you might go back to a larger agency for extra hands at a fraction of the cost.
