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Illustration: Rebecca Zisser/Axios

The world's largest advertising companies face a growing threat from clients moving more of their media strategy and creative businesses in-house.

Why it matters: The trend is happening amid a trust fallout between agencies and companies over murky ad-buying and contract bidding practices, some leading to federal investigations.

Driving the news: A new report from the Association of National Advertisers (ANA) finds that agencies are suffering more than ever from companies shifting marketing functions that were typically outsourced to agencies to teams in-house.

  • Nearly 78% of the companies surveyed say they now have an in-house agency function, compared to 58% in 2013 and 42% in 2008.
  • Roughly 79% of in-house agencies have in-house video production capabilities, and nearly half (49%) have established their in-house production capabilities within the past five years.
  • This year, over 36% of companies say they are bringing media strategy and planning functions in-house, compared to 22% in 2013.

What they're saying: The head of marketing and communications at a well-known consumer packaged goods company put it this way to me on a call:

"Sometimes we feel bait-and-switched. An executive team will come in to pitch us on a great idea, and then it gets punted down to lower-level staffers for execution who don't have the right expertise. It becomes more efficient to bring some of the creative services in house so we don't waste our time."

Between the lines: Financial struggles and minimal oversight at some of the biggest global agencies have for years led to bad practices, like kickbacks and bid-rigging, which have led marketers to question whether their dollars are being wasted.

  • Federal prosecutors in Manhattan have opened an investigation into media-buying practices in the advertising industry, the Wall Street Journal reported last month. The Journal also reported that the feds are seeking help from the ANA in the probe.
  • The investigation follows a 2016 DOJ probe over whether media agencies were undermining independent ad production companies by rigging the bidding process.

The big picture: The biggest agency holding groups, such as WPP, Omnicom and Publicis Groupe, have been struggling to drive growth over the past year.

The bottom line: "Investors are generally negatively oriented around agency holding companies at present, largely understandably," writes Brian Wieser, a senior research analyst for advertising at Pivotal Research, in a Q3 research note.

"Concerns around the potential impact of an FBI investigation into transparency related topics have re-emerged, and the regular drumbeat of doom and gloom from news reports of marketers' cost-cutting exercises, in-housing and use of consultants is ever-present."
— Brian Wieser, Pivotal Research

What's next: Some marketing executives say this conundrum has pushed them to move away from agency retention models and instead move toward a fixed-fee project billing model.

Go deeper

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People wait in line at Food Bank Community Kitchen on Nov. 25 in New York City. Photo: Michael Loccisano/Getty Images for Food Bank For New York City

America's food banks are sounding the alarm during this unprecedented holiday season.

The big picture: Soup kitchens and charities, usually brimming with holiday volunteers, are getting far less help.

5 hours ago - Health

AstraZeneca CEO: "We need to do an additional study" on COVID vaccine

Photo: Pavlo Gonchar/SOPA Images/LightRocket via Getty Images

AstraZeneca CEO Pascal Soriot said on Thursday the company is likely to start a new global trial to measure how effective its coronavirus vaccine is, Bloomberg reports.

Why it matters: Following Phase 3 trials, Oxford and AstraZeneca said their vaccine was 90% effective in people who got a half dose followed by a full dose, and 62% effective in people who got two full doses.

Updated 8 hours ago - Politics & Policy

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Health: Coronavirus cases rose 10% in the week before Thanksgiving.
  2. Politics: Supreme Court backs religious groups on New York coronavirus restrictions.
  3. World: Expert says COVID vaccine likely won't be available in Africa until Q2 of 2021 — Europeans extend lockdowns.
  4. Economy: The winners and losers of the COVID holiday season.
  5. Education: National standardized tests delayed until 2022.