While there has been a lot of talk about the rise of
independent agencies in the wake of holding company consolidation, market research and consulting firm Forrester predicts that 20% of independent agencies will be squeezed out of the market in
2027.
"Enterprise demand for productivity gains and AI transformation will split the independent agency market in two," the firm states in its just
released "2027 Marketing Agency Predictions" report.
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"Strategic specialists and technology-enabled agencies will thrive, while midsize generalists will face further margin
compression," the report states.
Agencies such as Mischief, Mother, DEPT, PMG, Horizon Media, and Wpromote will remain attractive to CMOs because of "differentiated thinking,
specialized expertise, strong talent, fast execution, and proprietary technology."
Generalist, production-focused, and creative-only agencies, on the other hand, "face pressure from adtech
platforms and client-side automation. As a result, 20% of the world’s estimated 50,000 independent agencies will face acquisition, downsizing, or closure."
More broadly, the report
asserts that rising AI costs, production commoditization, tech debt, and changing marketer needs will "divide agencies into those that execute and those that orchestrate."
As CMOs seek greater
influence over enterprise transformation and more marketing production moves in-house, "the most successful agencies" will focus on AI strategy, change management, and coordinating the people,
data, technologies, and organizational change needed to drive growth, per the report.
Forrester principal analyst Jay Pattisall says AI "won’t kill agencies, but it will
divide them. For over a century, marketing and advertising agencies grew by adding more people, more production capacity, more capabilities, and more billable hours.
"But AI’s ability to
speed up delivery, remove costs, and scale deliverables nullifies agencies’ labor model. As content creation becomes faster, cheaper, and automated, the value of marketing services lies in
orchestrating talent, technology, data, workflows, and AI agents to produce CFO-grade marketing impact."
Other predictions in the report include:
AI will cost more than the agency jobs it’s meant to replace. Most agencies buy AI as SaaS, obscuring the real costs of tokens, usage, and
GPUs. AI only remains affordable because equity markets and private investors subsidize its cost. As providers move toward usage-based pricing, agencies and CMOs will reckon with AI costing more than
the talent it was expected to replace.
CMOs will retire agencies' "content factories" in favor of their own AI
solutions. Brands will accelerate content insourcing as faster, cheaper, AI-powered studios absorb large portions of agency production. 67% of B2C marketing decision-makers say that insourcing more
creative and production capabilities will be a high priority over the next 12 months.
Three-fourths of agency
RFPs will require AI transformation expertise. CMOs pursuing enterprise AI leadership will expand agency expectations beyond campaigns and media buying to include AI transformation, operating model
redesign, change management, and enablement.
Half of global holding company revenue and service delivery will flow through
proprietary marketing operating systems. These platforms will become agencies’ primary competitive moats and marketers’ engines for marketing efficiency (a must have for clients), sales
impact, and brand differentiation.