to think I didn't stand a chance

[SmokeAndBone]

Of getting the job because they appointed someone who already works in the office?

The interviews were probably some kind of 'paper exercise' I guess.

Who can say? I've known occasions when an external candidate has been chosen over someone already seconded to a role. I've also known internal people be told informally that a role is theirs before the recruitment even starts. It's all a bit of a lottery.

Try not to be too discouraged. Ask for feedback if you can to help with your next application.

I've known internal candidates who got the job and other internal candidates who didn't.

I think that people who don't get jobs think that about the winning candidate - they were in/out; known/not known etc etc etc

All you can do is ask for feedback and continually improve your CV and interview technique.