Twenty-five years ago, as Aurora began its journey towards becoming the leading journal covering marketing and advertising in Pakistan, I moved abroad, transitioning from the traditional advertising business to the nascent data-driven digital world. At the time, most agencies in Pakistan provided integrated services, and independent media buying agencies were just starting up. Print was the dominant media and there were only a couple of TV channels. Large-scale sponsored events were limited, and the fashion industry was yet to take off. Billboards were still mostly hand painted. Major TV commercials were produced abroad but the home-grown talent of directors and producers was starting to emerge. Large agencies were affiliated with multinational agencies benefiting from global client alignments and in some cases proprietary planning tools and training. Agency remuneration was based on commission, generally fixed at 15%, and agencies competed on creative ideas.

Fast forward a decade later, around the time I returned to Pakistan, and the media had grown exponentially, with the proliferation of TV channels. In line with global trends, media buying houses were beginning to dominate media planning and buying, traditional agency brands focused on creative services and a crop of specialised agencies entered the industry, focusing on events, activation, PR and OOH advertising. In Pakistan, digital marketing was restricted to static websites and there was no trace of data-driven marketing. The shift towards a fee-based remuneration model was beginning, opening the path to competitive pricing and haggling.

The next decade and a half saw a major shift with the rise of the internet and the emergence of digital, social media and e-commerce platforms. Ubiquity of information and access to tools levelled the playing field for new entrants. Digital agencies mushroomed, followed by freelancers, fuelling the gig economy. Traditional agencies caught up by embracing the change, as marketers began shifting their budgets to new digital platforms. Cheaper smartphones and broadband access increased the reach of digital platforms creating a plethora of customer touchpoints. This increased the need for measurement and optimisation to achieve the goal of reaching the right audience at the right time with the right messaging. Advertisers started looking at project based pricing versus retainer based remuneration.

Now, 25 years later, the industry is on the cusp of major disruption driven by AI, and the hyper cycle of technological convergence opening myriad pathways for marketers to communicate. A report by Forrester on Agency AI-Powered Workforce Forecast, 2030 (US), says that, “By 2030, US advertising agencies and related services companies will lose 32,000 jobs to automation – 7.5% of the total agency workforce. While creative problem-solving roles will thrive, process-oriented roles will shrink due to the influence of automation, machine learning, and generative AI.” (https://www.forrester.com/press-newsroom/forrester-agency-ai-workforce-2030/)

These estimates are based on what we can understand now about a potential future. However, the convergence of technology like AI, 5G, Quantum Computing, VR/AR, Blockchain, Voice Recognition, and the Internet of Things has the potential for profound, constant, and unknown disruptions. Perhaps this is a reason behind President Biden’s recent ‘Executive Order on Safe, Secure, and Trustworthy Artificial Intelligence in the US’. It may be to slow the pace of change, so humans can contain the speed of disruption that has social, political, and economic ramifications.

So, what does this mean for agencies? An agency traditionally provides services that help marketers attract customers to their products and services. This purpose has not changed; however, the context is constantly changing, compelling agencies to rethink the services they provide. Technological disruption and innovation compound the challenge of reaching the right audience through the right channel at the right time with the right message, while enabling solutions that help solve it. Digital platforms have created low attention spans with many fragmented touchpoints; at the same time, data aggregation powered by intelligent tools allows better predictive personalisation. The key in this equation has been the marketer’s ability to use behavioural data which consumers exchange for using a platform for free.

Regulation around data privacy could threaten this arrangement. To comply with evolving European regulations, Meta is introducing a new subscription option in the EU, EEA and Switzerland. In November, they will be offering people who use Facebook or Instagram and live in these regions the choice to continue using these personalised services for free with ads or subscribe to stop seeing ads. While people are subscribed, their information will not be used for ads. It will be interesting to see how many people opt to pay 12.99 euros per month for their privacy and avoid ads. (https://about.fb.com/news/2023/10/facebook-and-instagram-to-offer-subscription-for-no-ads-in-europe/)

Assuming people choose not to pay and allow their data to be shared with advertisers, the explosive growth of information and the increasing plethora of permutations and combinations to communicate with customers will encourage platforms to use AI and give rise to new AI marketing tools. The process has already started. Amazon is rolling out an AI-powered image-generation tool to make ad creation better and easier. Meta is rolling out features that will allow advertisers to use Gen AI directly in their Ads Manager workflow. It includes features like background generation to choose relevant creative designs, image expansion to automate image adjustments for various formats and alternative text based on the original copy.

This is just the beginning.

AI is likely to disrupt the advertising business more than the internet as its impact grows, from enhancing production to automating decisions. Small businesses and freelancers can benefit most from the incremental impact of AI in enhancing their communication capabilities at an affordable price. Legacy agencies will face pressures on cost as clients will expect execution costs to come down through AI-driven efficiencies.

Large advertisers will expect their agencies to connect the dots and act with speed and agility. Going back to integration seems to be a trend, but not necessarily just through consolidation, but also through the collaboration of specialised agencies. A recent survey by the World Federation of Advertisers (WFA) and MediaSense shows “an overwhelming proportion of major multinational brands are looking to improve their agency model. Just 11% of respondents believe their current agency model will fit future needs, while 24% say it is unfit for future purpose.”

While regulations on data privacy and any guardrails around AI would affect the speed of disruption to the agency business, technology will be a dominant force affecting the business. Finding relevant technology platforms in the emerging scenarios and adopting them quickly will be critical for an agency’s survival. Talent will be a major challenge for agencies as low-skilled executional work will be automated and demand will be for strong creative and problem-solving capabilities. Agencies need training to adapt; collaboration, particularly for smaller agencies, will be necessary. Agencies will need to evolve to stay relevant in the age of information and automation and position themselves for emerging opportunities.

Ray Kurzweil, Google Director of Engineering, futurist, inventor and author, predicts that “Artificial Intelligence will reach human levels by around 2029. Follow that out further to, say 2045, and we will have multiplied the intelligence – the human biological machine intelligence of our civilisation – a billion-fold.”

Only time will tell if his predictions are correct but the process has begun.

Amin Rammal is a marketing technology enthusiast and Director, Asiatic Public Relations. amin.rammal@gmail.com