AI is ‘necessary, but not sufficient’: Experts say agencies need a strategy-focused reset
Advertising’s “outcomes” era is everywhere, from CTV to retail media and even Reddit. Ad tech echo chamber metrics are out; advertising tied to business metrics is in.
As advertisers push to link media spend more directly to business performance, agencies are being challenged to prove their value not just in how media is bought — but in how growth is planned.
The flurry of announcements coming out of CES frame AI as the savior that will carry agencies through that shift. Omnicom, WPP, Havas and Stagwell all touted their AI platforms. And why wouldn’t they? AI promises to cut costs while improving campaign results.
Some industry veterans aren’t convinced that’s enough.
“All of that is necessary, but not sufficient,” said Nick Manning, co-founder of Manning Gottlieb OMD (now under Omnicom), former chief strategy officer at Ebiquity and now founder at Encyclomedia.
“The real differentiation isn’t going to come from having a platform, because they’ll all end up having a platform. The reason clients choose to use a media agency is their strategic ability to think business problems through and provide solutions, experience and expertise.”
Others agree.
“Clients don’t want order takers. They want partners who are going to challenge them and understand their business and be strategic,” said Ryan Kangisser, chief strategy officer at Mediasense, which advises major advertisers on agency selection.
Investing in AI platforms could also place the Big Five in closer competition with Big Tech and their bottomless pockets. But if clients were never comfortable with platform black boxes, could they bring that attitude to agencies’ AI offerings too?
“There remains some reservation around this fully owned, operated and proprietary environment where clients may feel there’s too much supplier lock-in,” Kangisser said.
How we got here: Execution vs. strategy
Over time, agencies have grown closer to execution and buying and further from strategy and planning, Manning said. That has resulted in practices like principal media buying.
“It’s where the easiest and best money is made. It’s easier to make money out of trading than it is to pitch for business and get fees for strategy and planning,” Manning said. He added that agencies have to offer low headline rates to win business, hoping to recoup them later.
But the danger, as some in the industry see it, is that by doubling down on execution agencies risk becoming interchangeable. “They’ll cancel each other out … because what they do can be replicated, and the less clients are prepared to pay for it,” Manning said.
That lack of perceived differentiation in propositions by advertisers led to the Omnicom-IPG merger, Kangisser said. “When the differentiation and impact of your proposition is not coming across clearly, price will unfortunately become the default.”
Indies could have an advantage
Indie groups, like Stagwell, Brandtech and Monks, may be better positioned for this “outcomes” era.
“They’ve always been less reliant upon media trading income,” Manning said.
Kangisser pointed to the creative brands under the likes of Monks and Accenture, arguing that indies often “reinforce that independence, because clients do want to know there’s differentiation in their brands and in the work.”
Their perceived lack of bias in tech procurement could further help them indies stand out.
“The danger with some of the groups is that they built a mousetrap, and then they have to use it because it’s theirs, and they’ve spent money on it and it’s their job to sell it, whereas a better platform might exist somewhere else,” Manning said.
The business-minded marketer
For a glimpse into where strategy-led agencies can gain ground, look at Accenture Song.
The marketing arm of the consulting firm has surpassed some of the largest holding groups in yearly revenue, and part of its appeal, according to CEO Ndidi Oteh, is that “we do not go to market talking only about marketing. … We talk about customer service, commerce, sales, design and digital products.”
Integration has quickly become central to agency reviews, Kangisser said, as clients “want the work itself and the experience they create for consumers to be as integrated as possible.”
Manning said that if he were starting a new agency, he would “assemble a tight team of very smart people … who are able to talk to clients about financial issues, how they add value to the business, not just the brand or getting a sale tomorrow via a low CPA.”
“The divide is between the way the boardroom thinks and the way that agencies work,” he said. “Not enough has been done to link those two.”
People are the difference
Pressure on the agency model is visible in headlines surrounding Dentsu’s recent push to sell its international division. Bain Capital, the only remaining potential buyer, is reportedly “still interested, but with significant reservations.”
Google’s release of Universal Commerce Protocol for agentic AI shopping after CES further narrows where ad holding groups, for all their investments in tech, can claim lasting advantage.
“They’re not stopping, are they?” Manning said. “Which is why I say, even though it’s the hard route, you have to do what other people aren’t doing. And the platforms are not going to get into high-level communication strategy anytime soon.”
In the end, it’s talent, not tech, where agencies can still differentiate.
“Talent is probably being exposed the most at agencies through a gradual erosion of account management and strategic talent when what clients really want are the ‘gray hairs’ — [people] who can connect the dots and challenge their clients,” Kangisser said. “And they’re just doubling down on the tech, automation and AI, which we’re still early days in terms of being able to see the true impact of these solutions.”