AI accelerates everything in advertising – except how advertisers pay agencies, which always move to a ramp.
There are early signs – just look at the latest quarterly reflections from Sir Martin Sorrell – but, his peers and their customers are still in the counterpass of this change, not close to the summit.
“The AI has not yet transformed the remuneration model,” said Forrester analyst Jay Pattissall.
Finally, this will be the case. But for the moment, most of the conversation is only that: to speak. And when it leads to action, it is limited to prudent pilots on a small scale – experiences that refer to the future without engaging in it. There are still too many things to unpack, too many unknowns for CMOS and portfolio chiefs to rely on a complete passage of billable hours at prices based on the results of any time.
Like Ryan Kangisser, the director of strategy of Media Consultancy Mediasense, said it: “There is an inevitability about the transition to exit models as with AI, time (which dominates so many remuneration models) is often incidental to actual production. And despite an overwhelming appetite to improve the agency’s remuneration models, there are still a few barriers to overcome. ”
These obstacles tend to spread in three familiar categories: culture, technology and management. None of them is easy to dislodge.
Advertisers and agencies realizing around flexible workflows and the AI AI means going beyond fixed staff and rigid team structures. Supply teams and finance leaders need to clarity on what they buy exactly and how to measure it. The models based on the output require not only delivery but the definition. And in a company where “quality” can mean just about anything, it is not a small demand.
No surprise while these conversations rarely go beyond the pitch process – one of the rare moments when CMOs have both the delivery and the lever to question the model entirely.
“To work effectively, customers and agencies will have to instill clear advice, frequent dialogue and transparent comments to guarantee that each conversation does not focus on costs,” said Kangisse.
What is happening now is more a micro-talented than a revolution, motivated by certain advertisers entertained by certain agencies and mainly limited to specific markets or workwells. Imagine a localized campaign with 100 variations in the same creation, at a price of $ 1,000 each instead of the usual patchwork of billable hours: 10% of the time of an executive, 20% of the others and so on. He; Its different logic, and which begins to catch up – simply not on a large scale. Again.
This can change as more and more agencies stand out from the Holdco model.
Part of this change is already underway. In the past 18 months, the Medialink Council has followed a notable change in the way agencies think of their commercial models and the way customers react. AI already offers measurable efficiency in creative production, with average savings north of 27%, according to Medialink. In some cases, the costs in terms of assets for things like digital static images have dropped by more than 1,000%.
Performance -based remuneration also slips into conversation. Some agencies float it with selected customers, but linking production to results remains a challenge, thanks to the favorite industry problem: allocation.
As the director general of Medialink and partner said at UTA Donna Sharp: “We simply see that everything is cracking the basis of the process.”
What is old is new
Rumination about remuneration is prior to the emergence of AI in marketing.
On the creative side of the aisle, agencies and enormous people have experienced remuneration models based on the exit for several years – the idea being that such systems have granted the transparency of customers and the equity of agencies.
AI gradually turns heat on such efforts.
The monks belonging to S4 endeavor to reinvent the agency model before becoming obsolete by passing from invoicing based on the effort to the models focused on the exit. This change lays the basics of a “marketing as a service,” said Wesley Ter Haar, co-founder of Monks and AI chief.
Ter Haar criticized industry dependence on billed hours and constant hiring, which says that they are damaging culture and continuity. Instead, he advocates decoupling the income from the staffing, allowing more stable operations and supplied by AI. During certain meetings with potential customers, he said that Monks did not expect to be their agency in a few years, because a large part of the work presented will soon be automated: “We help customers go from agencies to the agent.”
“Production is a large part of the way we enroll our teams on productivity,” Ter Haar told Digiday in March. “… It takes a little time, although with some of our greatest customers, we get closer. This also opens up a different relationship between income and talent. ”
The message is clear: in the arms race for emerging agencies, the advantage goes to those who first produce productivity.
Small agencies also explore
Large agencies are not the only ones that consider the new models. Kevin Kerner, founder and CEO of Mighty & True, based in Austin, said that AI modified how he thinks of the value of the agency. It expects the pricing and agency fees to decrease, which will allow agencies to save the savings faster to customers.
“We will have fewer people, and I think we will be much more effective and we will have to save these customers,” Kerner said. “… We will always be precious because of our ability to achieve results faster, but I think we are likely to charge less to get these results.”
While the AI reduces production costs, the creative agency based in Atlanta Luckie explores how value -based prices can replace traditional hourly billing. When Mark Unrein became the main agency’s main OI officer, he developed a business plan for AI’s agency approach which estimated at least an efficiency and a saving of 25% and more than 70% on writing and other areas.
“We are all trying to increase this background margin and remove more from each pulley,” he said.
