Attention is the oxygen of marketing—your only path to true engagement and persuasion.
For years, advertising agencies enjoyed the golden era of captive audiences, glued to appointment television with limited options and a strong connection to brands. Legacy names that will forever be famous in our sector for their vision, creativity and entrepreneurship: Ogilvy, Burnett, Levy, Bernach, Rubicon.
And then we saw the consolidation era, first driven by agencies based in the U.K. who, under a favourable tax condition for “goodwill” in an acquisition, went on a buying tear.
In response to the “The British Invasion,” America and even France pushed back. Scale reaped massive rewards as they controlled a vast swath of the business, from creative to media, and any disruptor was swallowed up.
But times have changed.
Today, agencies fight for attention in a deafening age of noise, where most messages go unread or ignored. Audiences have moved from mass media to their media, transforming from passive consumers to active content creators. Trust in institutions and brands has eroded, while consumers stampede toward value.
Many are “consumed out,” constrained by shrinking discretionary income, while others have chosen to channel their spending into experiences rather than possessions.
And if that weren’t enough, AI arrives.
The majority of profit that an agency makes today comes from transactional work versus transformational.
But while transactional work is mostly valued at an hourly or blended hourly rate, transformative work can command a great premium. And AI will not be beaten on most transactional work. It will be faster, better, and cheaper, improving every second, without ever taking a break.
It doesn’t need physicality. Traditional definitions of scale once considered benchmarks of progress (square footage and office locations) are proof of old models. And work that exists in the cloud, done via automation,comes with potential tax advantages if more of the intellectual property and capability can reside offshore.
With AI, your competitors are no longer the agencies with the best Don Draper, it will be the ones that combine and apply creativity and technology. Rewards won’t be based on blended hours, they will be based on performance, as you will be competing against Meta, Google, Amazon, and in store trade media, aka retail media.
And last but not least, the greatest threat to advertising agencies will be clients bringing much of the work in-house. Done right, it will offer clients proprietary intelligence, with AI trained on their unique sector and competitive set, and content creation and amplification at the speed of life.
The Agency of the Future
What we are seeing with this merger is the beginning of a massive downsizing, which I might describe as a major compression, to a new model for agencies. This is the first of many mergers. I have my thoughts on timing, and strategy, but let’s save that for another article.
In this compression, agencies will shear away all their non-value added expenses. AI will replace many back and mid office functions, including even in the near term, accounting, legal and any other duty requiring governance.
While those agencies will be compressing in one area, they will need to invest millions and millions in capital to build their software and tech. Their AI must find nuances so that they can earn their share of performance dollars.
Canadian Agencies
Will that talent reside in Canada or in global hubs of excellence? Despite Canada’s cost advantage with a 75-cent dollar, we risk losing out on the epicentre of ideation, the hubs, unless we demonstrate that some of the world’s best creative and strategic minds are here.
To do so, will require three things. First, a collective voice where we remind the world of the creativity that resides here. I see the associations doing the lifting here with a targeted campaign. The second is individual campaigning on capabilities. I feel awards have become so saturated that they are losing their teeth. I prefer to see case studies backed by metrics. And the third, a bolder idea is for Canada to offer the same tax credits for advertising that they do for the television and film industry.
Opportunity for Boutiques
The next five years of industry consolidation and compression offer immense opportunity for entrepreneurial-driven boutiques like Rethink, Zulu Alpha Kilo, Broken Heart Love Affair, Courage…the list is long in Canada, joined by new disruptors, like Karla Congson the CEO and founder of Agentiiv, and many others. This change and opportunity is why I launched Chatter Ai earlier this year. What we are doing is a deep dive into the head, heart and hands of the consumer, as well as studying the competitive landscape and then using this fresh intelligence to create content that matters, at the speed of life.
This is my third boutique ad industry startup, and what I have learned from the first two is that we survive by a combination of resiliency, resourcefulness, and curiosity–all the important attributes needed to get the most from AI.
I do apologize for what may seem like a dystopian view, but I like to think of it as clear-eyed clarity from many years in the industry. And while aspects of what I have outlined here may feel like a dark outlook for some, there will be brightness for others.
I believe AI is the most disruptive technology we’ve ever faced. Those on the transactional side will find themselves competing with, (and losing to) technology that operates at a fraction of the cost of humans. But those on the transformational side—strategic thinkers and dreamers—will find no limit to what they can imagine and achieve. It’s why I got back in. What is the limit of imagination, and what is the limit to how we can express it?
May we live in interesting times.
