CMO TLDR: AI’s Agency Disruption & Ad Tech’s New Obsession

AI Disrupting Ad Agencies

Ad Agencies Face AI Transition Pains

Barclays downgraded major advertising holding companies, including Interpublic, Omnicom, and WPP, following analyst meetings at Cannes Lions, which revealed the industry's struggle to adapt to the disruption of artificial intelligence. The investment bank expects the sector's sluggish 2% growth to persist as agencies grapple with AI's threat to traditional hourly billing models and the risk that technology could make marketing services more accessible to brands directly. While analysts remain optimistic about long-term prospects, citing agencies' historical adaptability and AI's potential to expand advertising demand, the transition period promises continued headwinds for the industry giants.

Read more at WSJ.com

Agencies Face 'Death Sentence' Without AI Pricing Overhaul

While 75% of US advertising agencies now use generative AI, only 6% have figured out how to monetize these capabilities, creating what Forrester analyst Jay Pattisall calls "a death sentence" for their traditional hourly billing models. The industry's reliance on full-time employee pricing structures is breaking down as AI reduces headcount needs, with Forrester predicting 15% to 20% of advertising jobs could be automated by 2030, nearly double its original forecast. Despite chief marketing officers being open to performance-based contracts, agencies remain trapped by procurement processes that favor time-based comparisons, forcing a race to bundle creative, production, and media services under outcome-based models or risk being undercut by AI-powered competitors promising to deliver the same work "faster, better, and cheaper.”

The Drum

Ad Tech’s New Obsession

Ad Tech's Outcomes Obsession Blurs the Lines

The advertising technology industry's decade-long fixation on "outcomes-based" marketing has turned the term into a meaningless buzzword as vendors use it more as a selling point than a precise measurement strategy, according to industry executives. "Anytime you assert what an outcome is, versus asking the advertiser what their most valuable outcome is, you're kind of crossing the line into blurriness," said Jason Fairchild, co-founder and CEO of CTV startup tvScientific. Half of the chief marketing officers that media agency Known works with are now concerned they're spending too much on performance advertising, with executives complaining that while their teams demand heavy investment in search and Meta campaigns, "nobody knows what my brand is" anymore.

Read the full article at AdExchanger 

Quick Links

More than half of marketers invest in TV and streaming, with an eye on impressions and branding

Fifty-five percent of marketers are investing in TV and streaming advertising this year, with 79% prioritizing impression and branding campaigns over performance-driven formats, such as shoppable ads, according to a Digiday survey of 100 industry professionals.

Alliant Acquires AnalyticsIQ To Scale Up Its Audience Graph

Audience platform Alliant bought data analytics company AnalyticsIQ in a deal funded by private equity owner Inverness Graham, combining transactional purchase data with behavioral insights from health and wellness surveys to create a more sophisticated audience targeting system for advertisers navigating the cookieless future.

Start-ups are now table stakes for the future of ad tech

Major ad tech companies, including Index Exchange, DoubleVerify, and The Trade Desk, are increasingly investing in or acquiring startups to future-proof their businesses amid ongoing AI disruption, with speculation also swirling around potential divestitures at Integral Ad Science and Criteo.

Google Wipes 350 Android Apps Tied to Major Ad Fraud Scheme

Google removed 352 Android apps from its Play Store after cybersecurity firm HUMAN uncovered the IconAds fraud scheme that disguised malicious apps as everyday tools to serve fake advertisements and generate over one billion fraudulent bid requests daily, causing seven-figure losses in wasted ad spending.

Key Article Takeaways - TLDR

• Ad Tech has a long history of obsessing about something and forgetting about it a year later. Outcomes and Curation are the new ones. Don’t overly invest in these unless they are moving the needle for your business. Many of these ‘outcomes’ are just repackaging of what already exists. One partner called clicks outcomes, and that was the moment I realized it had been overhyped. While most obsessions find a way to stay around, one should think twice before building a business on them. Let’s not forget past obsessions like Viewability, Attention, DCO, Header Bidding (Ad Tech got a bit carried away there despite benefits), and others.

• Agencies need to grapple with AI, yes, it’s useful, but brands and marketers can use it too. The traditional economics of charging $100K for a non-technical FTE and then paying someone $50K or offshoring it and paying even less is harder to justify. It’s even harder to try to sell the agency’s AI products when they are just a UI sitting on OpenAI or Google. This isn’t the end of agencies, but the winners will have true AI products or will offer real, measurable value.

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