How agencies are safeguarding from being edged out by tech platforms

In a recent interview with Campaign, Martin Sorrell, founder of S4 Capital, said that big tech plaforms such as Meta and Google are getting closer to clients, edging out the need for agencies. He cited artificial intelligence as being one of the accelerators of this trend.

 

“Platforms will get closer with their clients,” said Sorrell. “That creates a a lot of nervousness among the larger agencies because they like to keep in control of their relationships.”

 

However, since then, TikTok's global head of brand marketing, Sofia Hernandez, has responded saying "I’m not trying to take jobs away from agencies." 

 

Campaign asked Hernandez about relationships between agencies and clients in light of comments by Sorrell who said tech platforms were encroaching on larger agencies. “That’s not my business model,” she said. “I’m interested in getting as many brands to lean into the platform [as possible] and, in order for them to do that, we need to enable the ecosystem of partners that they partner with.”

 

 

Similarly, Nicola Mendelsohn, head of global business at Meta, told a press conference in Cannes that the tech company did not plan on encroaching on agencies' clients. Instead, she said AI's capabilites can give smaller brands, which cannot afford to use big agencies, the ability to use the platform more effectively. 

 

Doubling down on 'human magic'

 

Mendelsohn also added that Meta’s long-term plan is to develop "artificial general intelligence" (AGI), a form of AI that includes a human-level capability of planning, memory and reasoning. 

 

This is the same ambition shared by Sam Altman, CEO of OpenAI, the makers of ChatGPT, who previously stated that their mission is the development of AGI and that it will handle 95% of what the industry uses agencies and creatives for today.

 

"It will mean that 95% of what marketers use agencies, strategists, and creative professionals for today will easily, nearly instantly and at almost no cost be handled by the AI," said Altman. "The AI will likely be able to test the creative against real or synthetic customer focus groups for predicting results and optimising. Again, all free, instant, and nearly perfect. Images, videos, campaign ideas? No problem."

 

You would think agencies might be running scared at this point, but for most it seems this is not the case. Many argue that there are some things that machines just won't be able to replace: human magic. 

 

"The doomsayers have been ringing the death knell of ad agencies for as long as I’ve been in agency creative leadership," says Simon Lee, chief creative officer and joint owner at The Hallway. "Could they be right this time? Maybe. But we are doubling down our focus on the key thing that has always been our real value add: super-talented humans with unique creative voices. This, and learning to augment our human magic with the fast evolving magic of AI."

 

And others see the relationship between ad agencies and tech platforms continuing to be collaborative in nature. 

 

"This evolution has been ongoing for years, with ad agencies adapting to add value collaborating closely with tech platforms," says Vinne Schifferstein Vidal, managing director of Made This. "AI is automating tasks that may not require human intervention in the future. In such cases, ad agencies might be excluded, like how media agencies have been bypassed in media buying for certain clients. However, claiming that ad agencies will be completely edged out is too extreme. Ad agencies bring context, strategic guidance, creative expertise, and craftsmanship to the table—elements that technology alone cannot yet replicate.” 

 

A future of in-housing and automation?

 

However, it’s indisputable that a significant proportion of the work that agencies used to derive their revenue from has already either been in-housed by clients or automated, and the rise of AI will definitely continue and accelerate this trend. A survey conducted by WFA and The Observatory International last year found that 66% of brands now have in-house agencies, with 21% actively considering one. According to that same survey, 70% already have strategic capabilities in-house and many plan to shift new tasks from external agencies over the next three years.

 

"In the past, clients have explored replacing agency services with in-house units. Some have met with moderate success, others have not," says Pankaj Nayak, managing director of media at Dentsu Singapore. "It comes down to the services and expertise that clients come to agencies like us for. AI will only augment the human creativity and scale that we will deliver to our clients. It will also help us make our business attractive to those looking for more strategic roles to play in growing clients’ business."
 

Some agencies are already accelerating that shift towards automation. The largest Chinese marketing agency group, BlueFocus, has already replaced human outsourcing with AI. 

 

"In the future, 50% of digital marketing work and positions will disappear, replaced by gen AI, digital employees, and internal super assistants," said Pan Fei, CEO of Blue Focus. "Only the remaining 50% who outperform machines, with stronger creativity and imagination than machines, may walk more firmly and competitively.” 

 

 

And so it stands to reason that for digital ad agencies, it’s a case of being in the 50% who can outperform the machines.

 

"I guess for the 50% who survive, this may rather wonderfully mean being as un-machine like and therefore as idiosyncratically insanely human as they can possibly be," says The Hallways' Lee. "The piece that remains to agencies is the piece that is and has always been the most valuable to our clients: original creative idea generation. We’re already seeing the emergence of a world in which big old agency models give way to small, super-creative studios each with their own distinctive style that clients turn to on a project by project basis."

 

How can agencies safeguard themselves?

 

The advertising industry is constantly evolving, and while disruptive technologies like AI can take away some opportunities, it can also lead to new ones.

 

"Claims about AI replacing 95% of agency work are likely overstated as it may also create many new roles in valued added areas," says Ron Lee, vice president of growth for platform and experience at MediaMonks. "Ad agencies need to adapt and innovate to stay relevant in this changing landscape as the tech platforms are gaining market share against the traditional agencies—that’s why we are investing in leadership in AI and collaborating with brands like Adobe and Nvidia."

 

MediaMonks say that to counter the rising threat of AI and tech platforms encroaching on agency clients, they are investing in tools and talent to derive deeper customer insights.

 

"This allows MediaMonks to collaborate with clients and tech platforms alike to develop data-driven strategies that maximise ROI," adds Lee. "Collaboration with AI companies and technology partners can be mutually beneficial for digital ad agencies. This allows us to stay ahead of the trends and focus on what’s most important: improving brand equity to our clients and maximising revenue on all ads spent with strong validation on results."

 

Fostering collaboration seems to be the way forward. 

 

"Agencies should focus not on countering the dominance of these tech giants, but on how we collaborate with them," says Anna Sythong, digital director, Initiative. "This involves contributing as validators and applying agency expertise to brand perspectives on the use of these advanced products."

 

However, above all, the saving grace for most agencies is going to be in their human ingenuity, that neither tech platforms or AI can ever fully replace. 

 

"For now and tomorrow, agencies will need a 'Human+' approach," says Richard Brosgill, CEO, APAC, Assembly. "AI lacks the level of human intuition and interpersonal connections that is required to create immersive brand experiences. Human ingenuity must continue to play a key role in defining, shaping and refining any consumer-focused approach."

 

Brosgill adds that having a human-centric approach is especially important in Asia, where every market is highly nuanced with its own culture, media landscape, and consumer behaviours. "We rely heavily on our teams' understanding of local markets to develop strategies suited for the local environments."

 

Above all, the advertising industry thrives on human creativity, emotional intelligence, and the ability to deeply understand and connect with audiences—something that AI is not yet able to fully replicate just yet.

 

"Our agency is proactively safeguarding against potential disruptions by embracing a 'talent+AI collaboration' approach," says Brosgill. "We recognise that AI can augment and enhance our capabilities, but it cannot entirely replace the strategic thinking, creative problem-solving, and emotional resonance that our team brings to the table. Additionally, we are actively exploring partnerships and collaborations with leading AI and tech platforms, enabling us to stay at the forefront of innovation while retaining our core human-centric approach."