• by Maarten Albarda , Featured Contributor, 7 hours ago

It looks like the agency timesheet is finally dead. Per the latest WFA reporting, labor-based agency compensation has gone from 54% 15 years ago to just 17% today. 

What comes in its place is agency contracts rooted in business and advertising outcomes (vs. outputs), which measures and incentivizes the quality of results, not hours burned.

Our industry has talked about this model since the early 2000’s, but artificial intelligence has now enabled its existence. With AI taking over manual heavy lifting -- like building keyword lists, managing bids, creating storyboards and running routine reports -- agencies can no longer justify billing you for an army of junior staff.

But before you celebrate your new, efficient, output-based contracts, take a hard look at what is replacing those hourly fees. Agencies aren't charities. They won't just surrender their margins because AI does the work faster.

In response, agencies are creating new or evolved contract and SOW (scope of work) components to avoid losing on client income and margin.

They might charge you for "platform access." Every major holding company is pitching a proprietary tech platform right now. They all use similar buzzwords: AI-powered, end-to-end, and agentic. But when you look under the hood, you'll often find that they are predominantly designed to lock clients in and extract a new type of recurring fee, letting the agency maintain their revenue while their actual labor costs drop.

And what they aren't making up in platform fees, they're making up in principal media or manufactured triple production bids, as I have already extensively written about.

So let's look at the full picture to understand how agencies are generating income and margin?

Advertisers have largely stopped paying for hours, but they are paying opaque tech fees for AI tools they can't verify.

Add to that non-transparent principal media and production deals.

And then there is still programmatic. The margins here are no longer super attractive for agencies, but they are attractive enough that they try and push advertisers into buying as much of any media through programmatic platforms (ideally with as little oversight and auditing as possible).

Per ANA reporting, on average, programmatic investment loses about 26% of each dollar to “transaction cost.”

In other words, you lose a little over a quarter of your budget to tech cost. And this is before low quality environment or straight-up fraud makes things worse.

Now your budget is pouring into programmatic CTV, a channel so fraught with measurement gaps with fraud spiking 140%, per reporting by the The Myers Report.

Why is fraud exploding in connected TV? Because that's where the money flows, and the fraudsters know exactly where the blind spots are.

According to the ANA’s Q3 2025 Programmatic Transparency Benchmark, CTV now commands nearly 46% of all programmatic ad spend.

Yet, because of Server-Side Ad Insertion (SSAI), standard verification tools struggle to measure it accurately. We  simply trust the premium nature of the television environment, even though programmatic CTV buys may be delivering close to zero value.

This leaves us with a situation where we can only repeat that old Charles Dickens saying, “It was the best of times, it was the worst of times."

We have made significant progress in how we value and incentivize agency work. We have begun with letting AI solutions take over mundane and uninteresting tasks. But because that is putting the squeeze on agency income and margin, they now pursue a potent mix of obscure margin-drivers to protect their bottom lines.

Cat-and-mouse, whack-the-mole, chicken-and-egg? Pick your analogy, but respond by paying attention.