Should you use an agency to manage your brand’s performance marketing or build an in-house team? I’ll break down this question for brands of different sizes.
This content first appeared in the No Best Practices newsletter on 09.24.2023.
Last week we covered how brands can set their agencies, and themselves, up for a successful relationship.
This week we’re going to cover two other popular questions in the agency vs in-house debate: 1. When should I hire an agency to manage my performance marketing vs hire in-house? And 2. Are agencies/media buying “dead”?
Jobs To Be Done In Performance Marketing
To answer the question “Should I hire an agency?”, we need to…ask a better question. We should be asking “What should I hire an agency for?”
First, let’s outline all of the discrete tasks required to run performance marketing successfully:
- Define KPIs and your annual and monthly budgets. The meat of this task varies a lot based on the brand’s size, stage of growth, and objectives.
- Develop the brand’s media strategy and allocate the monthly media budget across channels.
- Determine how channel performance will be measured in relation to the brand-level KPIs.
- Determine strategy within each individual channel–who should we target, what campaign objectives should we run, etc?
- Develop the creative strategy for each channel–what assets do we need, when do we need them, and who will produce them? (Note, this includes on-site assets like landing pages).
- Actually produce the assets.
- Campaign ops: set new campaigns live, monitor performance and recommend changes.
- Synthesis of campaign performance, brand goals, and factors outside the media ecosystem (ex. Seasonality, merchandising, macro trends) to guide decision making.
- Building out the analytics infrastructure to support all this decision making.
That is a lot of work. For smaller brands running ads on a single channel (like Meta), it could all be handled successfully by one person with a few corners cut.
Hypothetically, it could also be handled entirely by an agency. In fact, some of the world’s largest brands delegate 80% of these tasks to an agency and hire in-house teams to cover 30-50% (there is redundancy…more on that in a bit).
Delegation: You’re Doing It Wrong
In brands where the founder(s) don’t have much experience with paid media, the “jobs to be done” are often oversimplified due to lack of context. The founders will take an incomplete list and attempt to outsource it to an agency. Then they’ll get frustrated because the agency can’t provide the level of synthesis needed for the brand to succeed.
Hiring an agency or in-house team isn’t just about “getting things off my plate”. Instead, you need to look at the list of jobs to be done and ask yourself these questions:
- Which of these jobs present the biggest risk if done incorrectly?
- Which of these jobs are the most commodified/lowest risk?
- Which of these jobs can I do myself?
- Which of these jobs is a waste of time for me to do?
- Which of these jobs can I afford to outsource well?
No matter how you answer these questions, you or someone within your organization will have to provide high-level goals and synthesis. That doesn’t mean you need a full time head of growth. The founder can fill this role, and should for at least 6-12 months.
Agency or In-House At $1M, $25M, $50M & Beyond
At $1-4M in annual revenue…you are still figuring out product-market fit. You need to do this yourself, including figuring out creative strategy and production.
If you have a big pile of capital, you can hire an agency that specializes in finding PMF. If not, you can hire consultants by the hour who have experience with this process (like on Mentorpass).
At $5-25M in annual revenue…there are some agencies who are really skilled in getting brands from product-market fit to their first $10 or $20M in annual revenue.
What most agencies provide is a mix of media strategy, individual channel strategy, some support with asset development (ie. specs & light briefing) and campaign ops. That’s what a brand really needs at this stage of growth: a partner who can help them nail their main acquisition channel.
If channel strategy is dialed in, your main hurdles to reaching seven figures and staying there will be operational: can I get the inventory I need without running out of money? How do I handle surges in transaction volume? What happens when I need to expand the product assortment?
That doesn’t mean that you can check out of marketing entirely. You still have to provide the vision and the synthesis. And if you’re able to develop advertising assets in-house at a low cost, that can be a superpower.
Just because I’d recommend an agency, doesn’t mean you have to hire an agency. You can look for a head of growth, or channel specialists.
But a good head of growth is expensive (expect to pay $140-170k+/yr for a top tier candidate). Many of the best heads of growth aren’t even looking for FTE roles. They’ll work freelance for 2-4 brands and make $250k+/yr).
If you can’t afford a head of growth, you can consider hiring a channel specialist for your main customer acquisition channel (usually $65-90k+/yr). But you’ll have to provide this person a lot of training and mentorship relative to an agency or experienced head of growth. If you don’t have an onboarding and training process in place, I would not make this your first junior hire.
(Good) Agencies provide two major value-adds for brands of this size:
- They insulate against turnover. If your one paid media FTE resigns it’s going to be a painful 3-6 months.
- They provide channel expertise and market insight not available to most small, growing brands. This can help you leapfrog common and painful mistakes.
At $26-100M annual revenue…this is when it starts making sense to build out in-house capabilities. The reason? Most agencies charge you a percent of ad spend. Once you get to this level of revenue those costs start to get eye-watering. And you’ll need a lot more creative assets to fuel this level of ad spend–another cost that starts to add up.
If you take this approach, you MUST build in some redundancy within the org chart. You can’t put the weight of your entire acquisition pipeline on one person. It’s a recipe for burnout because that person can never really unplug from the business.
I would start by bringing on a head of growth who has done an agency to in-house transition before. They will help you map out the org chart and create the internal processes you’ll need to be successful.
Your next hire will probably be a channel specialist in your top customer acquisition channel. Your third+ hires will depend on your business’ channel mix and how you source your creative. You might want a content creator, video editor, or influencer marketing specialist.
If you really like your agency, feel free to stick with them. But busting past the $25M/year revenue benchmark often requires you jump from iteration to ideation. You’ll need to develop new offers and new ways of talking about them. You may need to expand your target customer base.
An agency is not going to be able to provide you the level of synthesis you need to accomplish this. It’s not their job. If you’re reluctant to hire in-house, this is another area where you can bring in an outside consultant to help you develop and prioritize ideas. (Side note, this is what I do in my customer lifecycle projects).
Beyond $100M in annual revenue…this is where you loop back and consider hiring an agency in addition to your internal team.
At this level of revenue, your channel mix has become a lot more complex. An agency serves two purposes here: project management and operational redundancy.
At $100M+ you want to start the process of outsourcing most of your commodified tasks to competent agencies. Do you think publicly traded, globally recognized brands have their in-house employees uploading products to the website? No. They pay an outsourcing firm to do it.
You don’t stay at this level by developing operational excellence in commodified tasks. You stay here by looking around corners re: consumer behavior and the competitive landscape.
As media mix grows, it will include programs that only run seasonally (ex. seasonal TV or OOH awareness campaigns). You shouldn’t hire in-house FTEs year-round to manage something that only requires attention 3-6 months of the year.
Are Agencies/Media Buying Dead?
Short answer: no. Meta and Google are still where it’s at in terms of harvesting that sweet, sweet brand-agnostic in-market demand. And both platforms are complicated enough that a baseline level of experience and competence is required to succeed.
I have seen dozens of brands with $10M+ potential stuck at $1-2M because of bad media buying or creative fundamentals. There is still value here.
Unfortunately, experience does not translate directly into value, because there are many media buyers and agencies who had experience at companies that went bankrupt, or companies that grew in spite of paid media. This is why picking the right partner for your growth stage is so important.
What is dead or dying is the premise that a brand will hand over a 10-15% commission on monthly ad spend, no questions asked. Brands are getting smarter about “jobs to be done”, and less willing to pay inflated fees for simple project management of an ad account.
Agencies need to clearly define what category and stage of growth they’re trying to serve, and then provide real, differentiated value to that market. Tired: we help eCommerce brands get a good ROAS. Wired: we help $10-25M beauty and wellness brands scale to $100M+ by using market expertise to develop world-class offers and creative.
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