Category: Ad Agencies

By Ashoke Agarrwal

In the early naughts, a friend left the ad agency world for academia, calling the ad world “a conspiracy of mediocrity.” I thought he was egregiously wrong and, in my mind, started comparing him to Ignatius J. Reilly, the lazy, obese, misanthropic, self-styled protagonist of John Kennedy Toole’s brilliant book, “A Confederacy of Dunces”.

I continued to spend decades in advertising and lost touch with my friend. I have always considered the ad world mercurial and more open to new ideas and talent than any other business. At one time, ad agencies were where to have the most fun with your clothes on.

However, over the past decade, I have started feeling uneasy about the future of ad agencies – both creative and media types. In the era of mass media, the agency was the expert partner that offered insights into the consumer’s psyche and cutting-edge culture and the insider track into the workings of the media.

Then, as the cushioning of the 15 per cent commission disappeared, agencies shed top-drawer planning and creative talent and lost their edge in consumer understanding and cultural trends. Moreover, the ad world stopped attracting the best crop from the fine arts, social sciences, and business schools, leading to an increasing feeling of superiority among marketing, product and brand managers when dealing with their agency counterparts. Over a decade, creative and media agencies sunk for a seat at the client’s marketing strategy high table to being vendors evaluated on specifications, speed, and cost.

With the arrival and burgeoning importance of digital and social media, the decline of ad agencies accelerated—the emergence of Google and Facebook as the fulcrums of growing importance and the relentless and cold-headed demands of performance marketing further disempowered agencies.

With the age of AI fast dawning on the world, another paradigm shift is in the offing.

Media strategy, planning and operations are already slipping into the realm of algorithms with minimal human intervention. As AI matures, the last vestiges of human input will disappear.

Two ongoing societal shifts impact creative strategy and development in the post-modern era. The new consumers – the Millennials and Gen Z – are way more advertising and marketing savvy, dismiss the hard sell, and are unaffected by traditional advertising’s hidden persuaders. They get their product information from credible sources and exhibit brand preference and loyalty based on a brand’s resonance with the value systems, concerns, and culture. At the same time, the new Millennium has since mass culture fragmented into millions of niches and tribes with ever-changing configurations of values, concerns and cultural totems.

In this changing world, brand messaging and campaigns have split into two distinct tiers – performance marketing and content marketing.

Performance marketing is tracking an individual’s purchase journey and contextual messaging that nudges her into the next favorable stage – click to the brand’s website or click away from a competitor’s website, click on the shopping or click away from it.

Tracking and identifying the context in performance marketing is already algorithmic beyond human intervention. The messaging in the context of performance marketing is quite simple and is currently pre-designed by humans. As AI develops, the context and the messaging will be more tightly linked and will need no human intervention.

Content marketing is a complex creative task, especially if it were to address all the relevant niches and tribes with relevant content that resonates with their changing values systems, concerns and cultural mores. While human creative teams struggle with this seemingly endless task, today’s LLMs can do a much better task. As AI systems integrate across tracking, segmenting, developing, and delivering content, even this last bastion of the creative agency will fade.

So, if today’s ad agency groups are to survive, they will need to morph into AdTech companies with proprietary ad tech that they can deploy as an agency or deliver as a SAAS service to clients’ in-house teams.

The first phase of ad tech that agencies could innovate and deploy is the development of fully integrated AI-driven AdEngine, based on an assimilated, up-to-date knowledge base-information on all relevant market data across all categories based on secondary and primary sources. While the knowledge base will integrate all available secondary and syndicated research, one of the distinguishing factors of an agency’s AdEngine would be the proprietary research and information it taps into. Based on business & marketing objectives and plans, the agency’s AdEngine would offer an alternative marketing communications strategy along with budgets, targets and pros and cons. Once the client has chosen the marketing communication strategy, AdEngine will execute the plan, with periodic reviews and fine-tuning that the client team can participate in.

The technology that will deliver AdEngines is feasible today. Meta and Alphabet already have an AdEngine, but they deploy it to maximize their revenue. Tomorrow’s global agency must create AdEngines that maximize their client’s ROI.

The next stage of AdTech is a decade or two away. Within a decade, a brand’s AdEngine will mature into the AI avatar of a brand. Parallelly, individuals, starting with the more affluent ones, will acquire AI assistants who manage all their interactions with the world – related to work, health, finances, education, training and consumption. I have termed this assistant Concierge Intelligence (CI), first in a post in February 2022 and the latest in a MxMIndia column in December 2023.

The development of AI avatars at both the brand and consumer end will lead to an era of “AI-to-AI Marketing” while we humans focus, hopefully, on more creative stuff than just buying and selling.

The AdTech agency will, in such an era, become a company with a consumer product – a CI for individuals- and market it like Apple and Samsung sell their smartphones today.

Thus, the AdTech route promises to lead from a B2B SAAS service to a B2C product that could rival the size and impact of today’s smartphone market.

Who will lead the AdTech market of tomorrow? Today’s global ad agency groups have the resources, but will they escape the rut all big successful companies get into? Will it be Big Tech that swallows the AdTech market with the already sizeable technology lead they have? Or will it be pesky start-ups free of legacy systems and pre-conceived notions fueled by the next generation of intrepid VCs? Interesting decades lie ahead!