As media agencies tout the potential of AI efficiency, marketers are asking, “Will this lead to cost savings, and if so, will those savings benefit my organization?”
No one is brandishing a pitchfork yet, but the barrage of probing questions is gaining momentum.
Marketers are asking questions like: How is your agency leveraging AI and automation? Which tasks or workflows are AI-driven? How do you maintain accountability? Are there new pricing models that reflect the efficiencies of AI? Can you share a success story where AI has significantly improved efficiency and outcomes for your clients?
These queries revolve around fundamental concerns. AI’s efficiency and automation talents have the potential to dramatically reduce billable time and disrupt traditional billing models.
After all, media agencies typically charge advertisers based on a variety of factors, such as project complexity, billable hours, and level of expertise involved. Any threat to this aspect of the model is therefore certain to draw the attention of government agencies and prompt serious consideration.
“The issue of how to get paid is a real issue,” said a consulting firm executive, speaking candidly on condition of anonymity. “Clients are saying to agency executives, ‘If AI takes 20% less time to manage media, does that mean our fees will also be reduced by 20%?'”
Of course, there’s a lot more to this than a straightforward question. Marketers are recognizing that AI’s capabilities in campaign targeting, personalization, and optimization may justify price increases rather than lower rates for these upgraded services. Still, questions about cost remain cautious.
“Financial savings are at the forefront of every discussion we have with marketing procurement teams about Gen AI,” said Greg Paul, president of consulting firm R3 Worldwide. “It’s going to be the most important topic this year. It’s up to both parties to be more transparent about when, where and how it’s used.”
Still, don’t expect sudden disruption. With marketers not yet in charge and agencies not in a position to dictate terms, the current scenario will emphasize continued dialogue as both sides navigate the evolving landscape.
That’s why executives are careful not to over-exaggerate these early discussions. They are wary of falling into the trap of overestimating the short-term impact of new technology and underestimating its long-term impact.
In the short term, they believe there will be little change in the way advertisers pay media agencies. But in the future, agencies that focus solely on selling time rather than value may face revenue loss due to automation.
In contrast, companies that adapt may demonstrate that they can deliver superior results per hour and justify charging more for strategic, high-level services.
“While it may still be early days, agencies are undoubtedly considering how to package their large investments in AI and reallocate the time saved to more strategic and valuable services to increase client revenue.” We’re going to look at ways to maintain that,” said Ryan Kanguisser, strategic managing partner at media advisory firm MediaSense.
What has been revealed so far is just the beginning.
Marketers are already assessing the potential risks associated with agencies integrating AI more deeply into their operations.
One such concern highlighted by Mark Gay, Ebiquity’s chief customer officer, revolves around the unique benefits that agencies can derive from leveraging their own data with AI models.
“In the medium term, we will see two-way value between the data input that the client can provide and all the things the agency can do with it across its client base, and the added value that the agency returns to specific companies. There is a good chance that the conversation will evolve so that the focus is on exchange.” Based on how the client has trained the AI, this value equation will define the commercial model,” Gay said. I did.
But for now, these discussions are focused on risk, not fees, and for good reason. Marketers have seen the impact of government agencies accessing their proprietary data. Remember the agency trading desk?
Part of the problem was the pooling of customer data, which could provide scale to agencies, but advertisers felt unchanged. Advertisers no longer have control over where their ads appear, who sees them, and how their data is used for targeting purposes.
It’s no surprise, then, that advertisers are wary of history repeating itself with AI.
These concerns have led marketers to seek assurances about what happens to their data once it is fed into government AI. They wonder if the model is being used for the benefit of other advertisers. If not, you want to know what protections and provisions are in place to ensure this type of risk is contained.
“As AI blurs the already fuzzy lines around usage rights, questions about data and IP leaks are bound to rise even more,” said Andrew Frank, vice president analyst in Gartner’s Marketing Practice. “We may expect to see renewed demand for category exclusivity and full-service agency consolidation.”
Essentially, it’s important for marketers to understand what value their agencies derive from their relationships with their customers, and whether that matches the return they receive. It’s easy to see how marketers might consider using this insight to negotiate lower fees.
“Some customers are considering moving to a model where they receive a reduction in agency fees in exchange for releasing some of their data to agencies that are building AI solutions,” said an executive at a global consulting firm. Told. They were not authorized to speak to Digiday and requested anonymity. “Some of the CMOs we work with say, ‘Wait a minute, our media agency should be paying me for this, not the other way around.’ There are one or two people.”
But for now, at least, agency leaders can breathe a sigh of relief. Most advertisers still struggle to understand the value of their data, let alone communicate it clearly to others.
Whatever happens, it will flare up slowly rather than suddenly.
But if these challenges do arise, agency leaders will need to firmly oppose some of these proposals, or at least not budge easily. That’s why it’s important for these agencies to proactively adjust the way they work to increase efficiency and pass those savings on to their clients. This has always been essential to running a successful media agency. Recognize that while the overall marketing budget may remain the same, clients always expect agencies to find more efficient ways to deliver results.
“It goes back to the idea that even if an agency wants to claim that it can improve performance, it’s difficult if not impossible to prove,” he said. Brian Wieser, media analyst and author of the Madison and Wall Newsletter. “Instead, we have to pursue efficiencies every year, so we have to plan for how we can further reduce costs each year. It has been confirmed.”
