Why startups are rarely using ad agencies and build their in-house marketing teams instead? The issue with agencies is that they are slower than in-house teams, and they execute but don’t take ownership of the results. Balticbest talked to several startup marketers and agency leaders from Estonia, Croatia, Latvia, Georgia, and Lithuania about this challenge.
It all starts with the mindset and the terminology. The agencies are offering marketing and advertising, but startups need growth.
“I don’t like the word marketing at all. I like the word demand generation. Marketing creates demand and sales are monetizing it. The expression “demand generation” makes the purpose completely clear. What is the purpose of brand-building if you are not generating demand and revenue?,” explains Amir Babovic, an experienced startup entrepreneur from Croatia.
The founders of Croatian eco-sneaker brand Miret, brothers Domagoj and Hrvoje Boljar are also cautious about the term “marketing”. “We do not want American- style, aggressive marketing. If we support some environmentalists, for instance, it’s because we support their cause. We do not treat it as influencer marketing”, claims Hrvoje Boljar.
The other issue is the B2B orientation of many startups, where the traditional agencies may not have the necessary skillset.
Sanja Buterin, the CMO of Croatia-based AI and robotics startup Gideon Brothers explains that they use mainly account-based marketing.
“We have to address the buyer boards, multiple decision-makers. We need to understand the pain point of each person on the buyer board. Also, in B2B business you need to do little “stalking” on Linkedin. Of course, data privacy is very important, but background research is a common practice in B2B marketing,” adds Sanja Buterin. Based on the research, B2B companies create personalized marketing messages.
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No good match between the startups and agencies
Linas Šiautkulis, the Chairman at Lithuanian Marketing Association and CEO of the media agency BPN thinks that there’s no good match between the agencies and startups. “When startup kicks off, agencies are simply not used to investing into the processes of adjusting to that speed of change, experimenting, and scalability which is expected by fast-paced startup world. Looking at the digital nature of nearly every startup’s customer acquisition, when all the global digital inventories (Google and Facebook) are at the startup’s fingertips and data analytics are inseparable from the product development – having your in-house team proves to be a more common way,” tells Mr. Šiautkulis.
Another factor is the importance of the team in the eyes of the investors. “Investors value the team, not how good the outsourcing partners are,” adds Linas.
The president of Estonian Business Angels Network ESTBAN Kristjan Raude agrees with this opinion: “I as an investor would value the marketing team, not the contract with an outsourced agency partner”.
“Nevertheless, when the startup sets its global presence and wants to penetrate each of the markets more deeply and need local media support – localized media services and local market know-how is usually served by media agencies. So, I would say that each of the startups that I know uses agencies services, only in different stages of its lifecycle and more on the project basis rather than “always-on” partnership,” concludes Mr. Šiautkulis.
Marek Unt, the CMO @ sustainable investing platform Grünfin (formerly working @ Bolt and Wise) tells that the traditional agency briefing format is too slow for certain stages in a start-up’s life and a lot of information gets lost in translation.
“However, Wise (formerly Transferwise) used an event marketing agency for its annual global employee events. "The chemistry between the agency and the people team organizing the events worked really well, and also there’s less of a tendency for companies to build out in-house event management capabilities compared to marketing capabilities," tells Unt.
Agencies do not want to take the responsibility
The first Latvian unicorn Printful has a marketing team of almost 100 people. “The advantage of the in-house team is that the team member thinks 40 hours per week about our company. It’s a different mindset from the agencies, where they worry about other customers also,” comments Raitis Purins, the Head of Marketing @ Printful.
“I have worked in a media agency: I had no idea how the campaigns performed. In the traditional model, creative and media agencies do not talk to each other and nobody takes full responsibility for the results,” is Mr. Purins skeptical.
“But we still work with the agencies. For example, one agency helps us to put our brand on a paper, formulate the brand mission and values”, explains Raitis Purins
“And we have PR agencies – it’s really hard to hire someone with all the necessary media connections. Our PPC agency has access to all the results. They control the creative, landing page, and they are accountable for the campaign results,” tells Purins. Mr. Purins thinks that the performance agency should get paid for the results, not with the monthly fee. He claims: “The agency has to take some risks”
Marek Unt, the CMO @ sustainable investing platform Grünfin … doesn’t think it’s impossible to build good media relations even in markets where the distance or language would usually be a barrier. “Obviously, it’s a bigger time investment for the in-house team, but I’ve preferred it on many occasions with some success. The added benefit of keeping media relations in-house is that media contacts see the value in cutting off middlemen and having relationships inside the company rather than with agencies,” tells Unt.
Startups prefer to keep marketing in-house
Merily Leis, CMO at Klaus who builds a quality management platform for support teams describes their way of working: “Marketing in Klaus is done in-house. This gives us an edge in many ways: We can work in a very agile manner and re-prioritize effortlessly when needed. We keep the expertise in-house and can constantly experiment and learn. Our industry is also hyper-competitive, and having internal knowledge about the product, market, competitors, and client base is the key to running successful marketing campaigns.”
“Our in-house marketing team frequently works together with external partners on different projects. Those partners are specifically selected to match our style, character, writing tone, and other aspects to seamlessly work together with our brand,” adds Ms. Leis.
Reelika Maranik, the marketing manager of Comodule, a startup that connects scooters and bicycles to the Internet explains: “ In B2B we don’t use agencies because all channels are covered by an in-house team. Also, the global e-bicycle industry network is small enough to cover media relations in-house and there’s no need to hire a freelancer or PR agency.”
Maranik says that the issue with agencies is that they are slower than in-house teams, and they execute but don’t take ownership of the results.
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“In a startup scene, you don’t have time to invest 80% of the time in planning and 20% of the time in execution, it’s the other way around,” tells Ms. Maranik.
Startups are not easy clients for the agencies
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Andris Rubins, the leader of Latvian ad agency Nord DDB Riga does not have good experience with startup clients. “We have had 3 startup experiences, but none of them ended well. Startups are very impatient: they expect sales to skyrocket the next day after the ad is live. But it does not happen like that,” tells Rubins.
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Would the agencies be willing to work for free, in exchange for equity in a startup client?
“Maybe one day …. But the investor would invest in 10 startups in hope that one succeeds. Agencies cannot afford to invest in building 10 startup brands and hope that one of them would fly. That’s too much time and money,” concludes Mr. Rubins
“But when the startup becomes a scale-up, they will start using agencies as well”, is Andris Rubins sure.
Kristjan Raude, the founder of Estonian digital marketing agency Impact 80/20 and the current president of Estonian business angels network ESTBAN tells that the main problem is the different speed of working: “Agencies are too slow for startups. On the other hand, if the agencies try to adapt to the speed and agility of the startups, it turns the daily procedures of traditional agencies upside down.”
Startups are sexier than advertising agencies
Boris Licina Borja, Head of Digital at TO NIJE SVE! creative agency from Croatia admits that the tech industry is sexier than the advertising industry these days. “Startups and hot tech companies, such as Rimac and Infobip are taking young people who wanted to work for the ad agencies several years ago,” tells Mr. Borja. He also tells that the tech companies are offering much higher salaries than ad agencies. “We cannot compete with the salaries”, admits Mr. Borja.
But not so in Georgia! Advertising is a very popular and well-known industry in Georgia. The popularity has even increased during the last five years. “Many young people want to work in this field, it is a very desirable job,” tells Eka Kipiani, the creative director of JWT Metro in Tbilisi.
