Agency Business and the Future

Aurora began its journeytowards becoming theleading journal coveringmarketing and advertising inPakistan, I moved abroad,transitioning from the traditionaladvertising business to thenascent data-driven digital world.At the time, most agencies inPakistan provided integratedservices, and independentmedia buying agencies werejust starting up. Print was thedominant media and there wereonly a couple of TV channels.Large-scale sponsored eventswere limited, and the fashionindustry was yet to take off.Billboards were still mostly handpainted. Major TV commercialswere produced abroad but thehome-grown talent of directorsand producers was starting toemerge. Large agencies wereaffiliated with multinationalagencies benefiting from globalclient alignments and in somecases proprietary planningtools and training. Agencyremuneration was based oncommission, generally fixed at15%, and agencies competed oncreative ideas.

Fast forward a decade later,around the time I returned toPakistan, and the media had grownexponentially, with the proliferationof TV channels. In line with globaltrends, media buying houses werebeginning to dominate mediaplanning and buying, traditionalagency brands focused on creativeservices and a crop of specialisedagencies entered the industry,focusing on events, activation,PR and OOH advertising. InPakistan, digital marketing wasrestricted to static websites andthere was no trace of data-drivenmarketing. The shift towards afee-based remuneration modelwas beginning, opening the path tocompetitive pricing and haggling.

The next decade and a halfsaw a major shift with the rise ofthe internet and the emergenceof digital, social media ande-commerce platforms. Ubiquityof information and accessto tools levelled the playingfield for new entrants. Digitalagencies mushroomed, followedby freelancers, fuelling the gigeconomy. Traditional agenciescaught up by embracing thechange, as marketers beganshifting their budgets to newdigital platforms. Cheapersmartphones and broadbandaccess increased the reachof digital platforms creatinga plethora of customertouchpoints. This increasedthe need for measurement andoptimisation to achieve the goalof reaching the right audienceat the right time with theright messaging. Advertisersstarted looking at projectbased pricing versus retainerbased remuneration.

Now, 25 years later, theindustry is on the cusp ofmajor disruption driven byAI, and the hyper cycle oftechnological convergenceopening myriad pathways formarketers to communicate. Areport by Forrester on AgencyAI-Powered Workforce Forecast,2030 (US), says that, “By 2030,US advertising agencies andrelated services companies willlose 32,000 jobs to automation – 7.5% of the total agencyworkforce. While creativeproblem-solving roles will thrive,process-oriented roles willshrink due to the influence ofautomation, machine learning, and generative AI.”(https://www.forrester.com/press-newsroom/forrester-agency-ai-workforce-2030/)

These estimates are basedon what we can understand nowabout a potential future. However,the convergence of technologylike AI, 5G, Quantum Computing,VR/AR, Blockchain, VoiceRecognition, and the Internetof Things has the potential forprofound, constant, and unknowndisruptions. Perhaps this is areason behind President Biden’srecent ‘Executive Order on Safe,Secure, and Trustworthy ArtificialIntelligence in the US’. It may beto slow the pace of change, sohumans can contain the speed ofdisruption that has social, political,and economic ramifications.

So, what does this mean foragencies? An agency traditionallyprovides services that helpmarketers attract customersto their products and services.This purpose has not changed;however, the context is constantlychanging, compelling agenciesto rethink the services theyprovide. Technological disruption and innovation compound thechallenge of reaching the rightaudience through the right channelat the right time with the rightmessage, while enabling solutionsthat help solve it. Digital platformshave created low attentionspans with many fragmentedtouchpoints; at the same time,data aggregation powered byintelligent tools allows betterpredictive personalisation. Thekey in this equation has been themarketer’s ability to use behaviouraldata which consumers exchange forusing a platform for free.

Regulation around data privacycould threaten this arrangement.To comply with evolving European regulations,Meta is introducing a newsubscription option in the EU, EEAand Switzerland. In November,they will be offering people whouse Facebook or Instagram andlive in these regions the choice tocontinue using these personalisedservices for free with ads orsubscribe to stop seeing ads.While people are subscribed,their information will not be usedfor ads. It will be interesting tosee how many people opt to pay12.99 euros per month for theirprivacy and avoid ads. (https://about.fb.com/news/2023/10/facebook-and-instagram-to-offer-subscription-for-no-ads-in-europe/)

Assuming people choose notto pay and allow their data tobe shared with advertisers, theexplosive growth of informationand the increasing plethora ofpermutations and combinationsto communicate with customerswill encourage platforms touse AI and give rise to new AImarketing tools. The processhas already started. Amazonis rolling out an AI-poweredimage-generation tool to make adcreation better and easier. Meta isrolling out features that will allowadvertisers to use Gen AI directlyin their Ads Manager workflow. Itincludes features like backgroundgeneration to choose relevantcreative designs, image expansionto automate image adjustmentsfor various formats and alternativetext based on the original copy.

This is just the beginning.

AI is likely to disrupt theadvertising business more than theinternet as its impact grows, fromenhancing production to automatingdecisions. Small businesses andfreelancers can benefit most fromthe incremental impact of AI inenhancing their communicationcapabilities at an affordable price.Legacy agencies will face pressureson cost as clients will expectexecution costs to come downthrough AI-driven efficiencies.

Large advertisers will expecttheir agencies to connect the dotsand act with speed and agility.Going back to integration seemsto be a trend, but not necessarilyjust through consolidation, butalso through the collaboration ofspecialised agencies. A recentsurvey by the World Federation ofAdvertisers (WFA) and MediaSenseshows “an overwhelming proportionof major multinational brands arelooking to improve their agencymodel. Just 11% of respondentsbelieve their current agency modelwill fit future needs, while 24% say itis unfit for future purpose.”

While regulations on dataprivacy and any guardrails aroundAI would affect the speed ofdisruption to the agency business,technology will be a dominantforce affecting the business.Finding relevant technologyplatforms in the emergingscenarios and adopting themquickly will be critical for anagency’s survival. Talent will bea major challenge for agenciesas low-skilled executional workwill be automated and demandwill be for strong creative andproblem-solving capabilities.Agencies need training toadapt; collaboration, particularlyfor smaller agencies, will benecessary. Agencies will need toevolve to stay relevant in the ageof information and automationand position themselves foremerging opportunities.

Ray Kurzweil, Google Director ofEngineering, futurist, inventor andauthor, predicts that “ArtificialIntelligence will reach human levels byaround 2029. Follow that out furtherto, say 2045, and we will havemultiplied the intelligence – thehuman biological machine intelligenceof our civilisation – a billion-fold.”

Only time will tell if hispredictions are correct but theprocess has begun.

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