My first impression of the trend of magazine publishers providing in-house production services for advertising clients, thus bypassing the traditional third-party agency is that it constitutes some sort of church-state division.

That’s not really accurate, of course. Editorial is under no more pressure by having the ad-creation people down the hall than when they’re across town/country. If anything, it’s more like a breach of the state-state division: The business side of a publishing house appropriating another business function that’s ordinarily outsourced. And worse, offering it as a bundled value-added part of the ad buy:

Meredith 360 charges for its services, while Condé Nast and Hearst charge for costs only when they create custom programs for advertisers, executives at those companies said. (Condé Nast also makes a profit from events like Fashion Rocks.) The rate structure means that Condé Nast can often beat ad agencies on price, [Condé Nast Media Group president Richard] Beckman said.

“We don’t have to make money from our creative, because we make money from our media,” he said.

So where does this go? Do in-house agencies retain clients even if those clients stop buying pages in their companies’ publications? How proprietary is the creative — can it be used in rival magazines/outlets? Right now, there are too many questions to form a clear opinion.