• by Cory Treffiletti , Featured Contributor, Yesterday

For ad agencies, it is the best of times, it is the worst of times.  In all my years of work, I have never seen so much opportunity -- along with so much threat -- for agencies as we see right now. And agency management knows this.

The latest confirmation comes from the news this week that WPP CEO Mark Read will be stepping down at the end of the year.  Mark Read is a very talented, very successful executive who guided that company for seven years. His exit is one of many major changes at agency holding companies in the last three months because of, simply put, AI.

AI tools are the best thing to happen to the agency business, but they also threaten how these businesses operate.  AI can create massive efficiency in the operating model, allowing much of the fundamental day-to-day work to be automated.  AI can be used for research, initial design comps, competitive insights, and even first-round brainstorming.  This negates the need for entry-level talent who typically undertook these efforts before, allowing the mid to senior-level talent to focus their attention on their clients while charging a premium for their time. 

On the flip side, a lack of entry-level talent makes the future dimmer for agencies because they will be unable to train the next round of leadership, and they set themselves up for a talent gap in years to come.  What’s more, the agency full-time equivalent compensation model is threatened because fewer FTEs means the brand procurement teams will push on those margins and will attempt to create more performance-based compensation. 

I would think these automated tools will help agencies achieve their clients’ metrics, and participate in the upside, but agencies are notorious for not wanting to take on performance comp.  It essentially devalues the work they put in upfront, seemingly in the hopes that market conditions remain favorable and the work will succeed because all the ducks are lined up properly.  Those ducks rarely line up, and especially so in this turbulent economic time.

If you are starting an ad agency right now, you can start from a position of immediate strength and leverage the tools you have at your disposal.  These are the same tools large holding companies have.  While they may be putting a veneer on those tools, with a little vibe-coding on your part, what you have will be the same.  You will be able to structure service layers that are more profitable from the beginning, and if you have hyper-creative, proven leadership to help you sell through your ideas, engage customers, and be the Mad Men and Mad Women in the room, you can probably build a pretty successful agency very quickly.  

As I’ve been saying for some time now, humans are non-linear thinkers. We can truly be out of the box, but it’s nice when you have a well-run, fully automated box to support your ideas.

The agency model will survive because of this big shift, but the role agencies play will indeed be different.  I predict agencies will be gunning for the best senior-level talent because those are the people that win accounts.  They can sell the software, they can sell a vision, and they can come up with the non-linear ideas that break through.  It’s not dissimilar to the people who have been selling ad tech for years, because these people straddle the world of creativity as well as technology to be successful in their space.

I do think it will be a bumpy ride for the shops that don’t embrace this model.  What do you think?