That's the headline Google's NotebookLM wrote when I
asked it to help me draft this column on a new report about how agencies need to evolve their AI business models.
The rest of the draft isn't bad either, so I'm pasting it below, because
NotebookLM does a far better job of distilling the 95-page report -- "Redesigning The Agency Value
Model" -- than I can, but I did learn some things about the agency business that I didn't really understand before, including the erosion of agency profit margins (down to an average of 10% from a
Golden Age high of 30%).
And the truth is no one really knows how the artificial intelligence (AI) transformation will impact the value -- and margins -- of agencies going forward, but the
report is written by experts (VoxComm and Lodestar Agency Consulting) and offers a pretty good roadmap for navigating the not-to-distant future of yet another round of "creative destruction" that is
likely inevitable.
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It also draws on real-world experience of the impact and adoption by some best-in-breed agencies, so it's worth an in-depth read if you want more than just NotebookLM's
digest.
I also asked the agent to generate a brief audio overview (click below) and a "mindmap"
delineating the thinking of the report, which you can see here.
# # #
By
NotebookLM
The advertising industry is facing an existential crisis hiding in plain sight. Across the globe,
agencies are producing more work, faster, and with better tools than ever before—yet our margins are shrinking. In the "golden age" of advertising, agency profit margins hovered around 30%;
today, the worldwide average is a mere 10%.
Furthermore, the average creative is churning out nearly five times the output for the same (or less) compensation than they did a decade ago.
Why are we working harder to earn less? The answer lies in a fundamental, structural misalignment: we are defining and monetizing our value through time and
effort rather than business impact.
When you sell your agency's time by the hour, you are selling a commodity.
And in an era where generative AI is accelerating production and compressing timelines, agencies that cling to effort-based pricing models are essentially penalizing themselves for their own
efficiency.
As AI lowers the cost of delivery, it rapidly erodes the perceived value of the work.
A new report from
VoxComm, authored by Brian Kessman of Lodestar Agency Consulting, calls for a radical but necessary transformation: it is time to redesign the agency value model. We need to stop selling services and
start selling solutions.
Escaping the "Busy by Design" Trap
Most agencies today are stuck in
what the report identifies as the "Busy by Design" or "Scaling with Strain" archetypes.
They boast broad, "full-service" capabilities, build custom scopes from scratch for every client, and rely
on maximizing billable hours and headcount to grow revenue. This creates a zero-sum tug-of-war with procurement teams, who are naturally incentivized to minimize the very hours the agency is trying to
maximize.
To reclaim our pricing power, agencies must become what the report calls "Distinctly Scalable." This means scaling expertise and outcomes, not headcount and effort.
Becoming distinctly scalable requires four key shifts:
- Define Value: Stop trying to do
everything. Focus on a narrow set of high-value business problems your agency is uniquely qualified to solve.
- Design Value: Codify your expertise. Instead of treating every brief as a blank slate, translate your experience into structured, repeatable, and productized solutions.
Repeatability improves consistency, reduces delivery risk, and makes your value easier for clients to buy.
- Deliver Value: Build your teams and workflows around achieving outcomes rather than tracking utilization.
- Capture Value: Replace the rate card with a Solution-Based Monetization System. Decouple your pricing from the labor required to execute the work,
and instead anchor it to fixed fees, subscriptions, licensing, or performance-based models.
The Shift is Already Happening This isn't just theoretical; forward-thinking agencies are already proving this model
works:
- FIG rebuilt its economics by strictly separating price from staffing. Time is now used only
as an internal check, ensuring pricing is based on the strategic value provided rather than the bodies in seats.
- 72andSunny has moved away from FTE-based pricing toward a modular product menu with fixed fees, deliberately removing timesheets as the primary way work is evaluated or
sold.
- Monks completely reimagined its offering for the AI era, shifting to a single
subscription model that combines talent, technology, and continuous improvement into one predictable annual fee.
Reclaiming the High GroundTransitioning away from the billable hour requires courage and a fundamental mindset shift. As VoxComm notes, we
must proactively grow brands, not reactively fill scopes of work.
When agencies sell effort, they hand
negotiation power directly to the buyer.
When agencies sell solutions—proven methodologies to solve critical business problems—they take that power back.
It is time to stop
letting clients buy our expertise the same way they buy office supplies.
The technology that threatens to commoditize our labor is the exact same technology that gives us the leverage to
finally redesign our worth.