Agencies are racing to prepare for the artificial intelligence era of advertising, enacting significant restructurings and acquisitions while standing up scaled AI solutions. Some analysts are skeptical about how far these bets can really go, stoking fresh uncertainty for the agency sector that is betting the farm that AI will reignite growth.
Half of agencies’ proprietary AI platforms will either wind down or become obsolete by 2029, researcher Gartner predicts. That’s because agency-built offerings need to contend with the rise of open-source AI platforms developed by what are known as hyperscalers — the Googles and Amazons of the world — that can service functions beyond marketing, according to Gartner. Open-source platforms are expected by Gartner to support more than 75% of enterprise AI deployments by 2028, gaining traction for their level of customization and favorable cost compared to proprietary platforms.
“I don't hear [agencies] talking about those platforms, whether it’s [WPP] Open or Omni or anybody else, being an enterprise-wide AI platform,” said Jay Wilson, vice president, analyst at Gartner for Marketers. “That’s the big disconnect or the big risk to agencies right now. They’re still kind of thinking at the marketing level, at the advertising level, maybe getting into CX.”
The threat of hyperscalers is tied up in the broader organizational influence, or lack thereof, CMOs wield on the client side of the business. While many marketing decision-makers have been early adopters of AI for tasks like content creation, chief information officers and related roles will more likely make the final call on what AI tools brands choose to adopt across the enterprise, according to Wilson.
“Essentially, we believe that at an enterprise-wide level, the CIO is going to own that enterprise AI strategy, and a CMO who’s basically embedding with a WPP or an Omni or a Dentsu or whatever, is likely going to get disintermediated from that discussion,” said Wilson.
Weighing the risks
Agencies currently provide a lot of value in helping brands navigate AI disruption, per Wilson, including through upskilling, speed to market and drawing on knowledge from a wide client base and global reach.
“What an agency provides that is not tech-dependent — meaning cannot be as easily commoditized — is that outside-in perspective on a client's business,” said Wilson.
Still, Gartner recommended that CMOs not become overly reliant on agency-built AI platforms, since agency relationships are liable to churn over time. Similarly, the costs and complications of migrating to different agency AI platforms could be cumbersome. The researcher suggested CMOs avoid locking into long-term contracts related to AI and instead push for initial proofs of concept and the right to terminate agreements without incurring penalties.
Meanwhile, agencies need to consider how they can differentiate as the technology category at large becomes more democratized, commoditized and open source. The push from the ad-holding groups to master AI has dovetailed with a painful period of contraction, inclusive of heavy rounds of layoffs and the elimination of some legacy agency brands. The hit to the talent pipeline now could spell more trouble down the line, as qualitative capabilities and a degree of human discernment may be more important in the long run.
“The agency value goes back to what the traditional agency values have been, which have been creativity, innovation and customer insight,” said Wilson. “Agencies can still provide value in applying the art on top of the science of AI.”
