Oct 26 2023
Clare McKinley

The Future of Advertising Agencies: How Leaders Can Learn and Evolve


Oh, agencies. What hasn’t the world thrown at you lately? COVID-19? Check. The Great Resignation? Check. New regulations, the rise of generative AI, and the planned deprecation of third-party cookies in Chrome: Check, check, check. Did we mention media fragmentation yet? Or prolonged economic turbulence and uncertainty?

We could go on, but you get the idea: There have been so many non-stop changes in the digital advertising world that trying to manage it all can feel like a never-ending game of Whac-A-Mole. How can agency leaders approach this evolution thoughtfully and strategically, despite the many unknowns?

To find out, we spoke with five industry veterans to gather their insights into what agency leaders need to know about this moment and identify how they can situate their organizations to not only adapt as the industry transforms, but to lead the way towards positive change.

What are the biggest pressures and challenges forcing agencies to evolve?

Katie McAdams, Chief Marketing Officer, Basis Technologies: Fragmentation and the proliferation of platforms needed to execute media have increased at a pace that agencies cannot keep up with without adding headcount and costs. At the same time, agencies need to drive profit, growth, and media spend.

April Weeks, EVP of Media Services and Operations, Basis Technologies: The rapid emergence of AI and increasing role of technology within business operations, the need to deliver a cohesive performance story across all channels/data sets, and preparation for third-party cookie deprecation and the various related impacts to campaign performance, including signal loss. Many agencies also continue to deal with talent retention challenges and labor costs. At the same time, agency leaders are faced with balancing business growth, navigating a rapidly changing marketing landscape, and economic headwinds.

The urgency for agencies to evolve can be linked to all these pressures, coupled with a need to provide increased value for clients. Many processes and ways of working within agencies are rooted in legacy systems that do not garner efficiency or allow talent to focus on the highest-value client work. With the rate of change happening across the industry, agencies that do not develop a framework and plan for modernizing their operational model that’s inclusive of AI and technology will likely encounter increased challenges with both client and talent retention—all  during a time when there will likely be downward pressure from clients to deliver more for less cost.

Ryan Manchee, SVP of Brand Marketing, Basis Technologies: In-housing and talent recruitment/retention are two of the biggest pressures pushing agencies to evolve—but it’s not that simple. While the momentum around the in-housing trend has tapered, the threat remains that a brand will bring certain functions in-house, leaving agencies without that business. Meanwhile, brands in-house because they believe they can do the work better (i.e., cheaper, more transparently, or faster), whether that relates to media buying, creative production, or something else. The other big issue is around both the recruitment and retention of talent. There has always been volatility for agencies around talent, but we've seen a growing trend to add more mid- and junior-level employees to complete intense work that isn’t the most inspiring. Then the pandemic hit, and now agencies are pushing for a return to the office. These factors combined are enough to push a significant number of future agency leaders to switch industries.

Mike Olson, SVP of Agency Development, Basis Technologies: Evolving talent, slow-paying clients, high interest rates, and challenges to winning new business are forcing agencies to evolve. Agencies are caught in the middle between clients who are cutting budgets and paying slower, and platforms that have tight payment terms. On top of that, if an agency needs to get an increased LOC (Letter of Credit) from their bank, the interest rate is prohibitive from a cost of capital perspective. So, agencies will continue to build a puzzle of platforms with longer payment terms so they can address any necessary cash situations to keep their businesses fiscally healthy.

How can agencies stay competitive and prepare for the coming changes driven by these pressures and challenges?

AW: I recommend implementing a test and learn approach, where you have the ability to take smart risks and fail fast. Don’t wait to understand how changes in the industry will impact your business. Begin taking steps now to experiment with AI, explore how technology can drive operational value for your business, and understand where your internal talent spends their time and how to maximize their value for the business. While many agencies are already doing so, don’t underestimate the value of preparing clients for third-party cookie deprecation and how that will impact data strategies and campaign analytics.

RM: Agencies are hired by brands because of a specialty, because of their unique point of view, and because they stay on top of what’s new and what’s coming. Agencies also help drive culture and align a brand’s products or services with cultural moments, so they are memorable. The agencies that keep these aspects of their service in focus have been and will stay competitive and successful. As an industry, we’re often too focused on innovation of technology over the importance of intersecting with culture.

MO: Agencies need to take a stance of support—and also of accountability—to their talent. By providing a culture that allows for the best employees to continue to iterate on how to achieve success differently, your team will feel empowered to continue driving the business forward. By keeping your best talent engaged, motivated, autonomous, and focusing on executing day to day, agency leaders will help ensure revenue, so the fiscal health of the business is sustainable. At the same time, it’s important for agency leadership to acknowledge that despite the best culture and talent, macroeconomic headwinds can still get in the way of business goals. And making sure employees are contributing to the culture and company that is providing for them is critical to keep the business growing.

Zach Moore, SVP of Digital Media Operations, Basis Technologies: Agencies need to always be thinking about the uncertainty that brands face around the world every single day. An agency always needs to continue to evolve their service offerings to stay competitive, and of course, that means investing in your people. Agencies should be doubling down on talent, keeping their best and brightest, and really pushing for technology to take on more of the tasks that, while absolutely business critical, don’t inspire and retain clients.

In your conversations with agency leaders, what topics are forefront on their minds? How are they thinking about the evolution of agencies?

AW: In my conversations with agency leaders, the topics of business growth, coupled with short-term economic uncertainty, are typically top-of-mind. Everyone seems to be focused on what they can do to create cost savings and efficiency within the business while continuing to meet client needs. This creates an opportunity for agency leaders to evaluate the role of technology within their business.

MO: A few topics are at the forefront of my conversations with agency leaders. First: how ready they are for cookie deprecation. If an agency is a heavy digital spender and is not testing cookieless conversions and contextual targeting capabilities, they are already behind. How to win larger clients is another big topic, as well as how to break up with smaller clients that require too much work from internal teams. Shoring up platform agreements to help with the flow of cash in and out of the agency is definitely top of mind. On top of all of that, agencies are thinking about how to provide a culture and environment where talent can thrive and produce good work. Whether, why, and how to return to the office is on a lot of leaders’ minds right now.

In terms of how agency leaders are thinking about evolving, it all comes down to getting clear on what their business excels at, and then doubling down with good talent while reducing efforts to try and “boil the ocean,” which tends to end with you doing everything just OK.

With automation tools and generative AI already making an impact throughout the industry, how will the adoption of AI-driven tools and technologies shape the future of agencies?

AW: AI- and automation-driven tools will reshape how deliverables are created as well as their associated timelines for creation, and job descriptions will adapt as a result. Work that currently takes multiple teams will be reduced to fewer people, timelines for development and delivery will accelerate, and roles within agencies will become less siloed with some aspects of the campaign development and execution process becoming fully automated. Through automation, there will be an opportunity to evaluate where talent is best utilized, and shift their time from low-value to high-value tasks. Through these changes, it is likely we will see opportunities to explore new ways of monetizing the agency/client relationship.

RM: Mitigating the mundane and monotonous to free up time for the fun and fantastic. If AI and automation can deliver on that promise, then agencies will be well positioned for growth, and for their team’s growth.

KM: Generative AI is having a moment right now, and while it’s not going away, I think the hype is going to die down once we start to see a lot of AI-generated content and creative that looks and sounds the same. Marketers need to be smart about how and when to use GenAI. It can be a great starting point to spur creativity and save time, but I think smart marketers and agencies are thinking about how their teams can grow more effective by using these tools, not how they will be replaced by them altogether.

MO: Humans should not be completely removed from the equation. The magic place we want to get to is a beneficial blend of AI and humans to ensure efficiencies throughout the agency. Shifting employee responsibilities from low-value work to high-value strategic work will not only empower them to grow, but also allow businesses to reduce costs needed to pay people for low-value activities that machines can do quickly and accurately.

ZM: I think the noise around AI and creative production has been a bit of a letdown. Swapping backgrounds and images on a bunch of display ads has been around in various forms for years. I would encourage less focus on that and more of a commonsense approach that looks to incorporate AI basics into the typical employees’ routine and process, to help them become better, more knowledgeable, and more effective at their job.

What’s your biggest “hot take” on the future of agencies?

KM: With deprecation of the cookie finally nearing (we think?!?), we may see agencies shifting back towards relying on their creative and storytelling to drive performance. I think we’ve gone so far in the direction of focusing on audience targeting tactics that the creative often ends up taking a back seat in the conversation. It’ll be exciting to see how we can move the creative back into the driver’s seat, and I think the industry is ready for that to happen.

MO: Agencies that can run their business and generate profit by focusing on their core competencies will continue to thrive, so long as the culture to attract top talent remains in place. Growth at all costs is no longer a winning strategy. Intentionality on profitability is critical. We know the media side of our business evolves daily, so staying current and ahead of technological and device trends is crucial to guide clients and gain trust. Also, we cannot ignore creative. The cornerstone of any successful ad campaign is compelling creative. AI can help to build units quickly, but to conceptually develop captivating creative is a unique skill set that's innately human.

The Future of Agencies: Wrapping Up

While the best approach to evolution will vary based on each agency’s characteristics, strengths, and goals, there are a few north stars leaders can follow to ensure they aren’t left behind. These include prioritizing creative, leading the way in adopting privacy-friendly advertising methods, and investing strategically in AI- and automation-driven tools designed to make your teams more efficient while allowing them to focus on more strategic and fulfilling tasks.

Regardless, there is a lot for agency leaders to keep track of as our industry evolves. Want an easy way to stay up to date on all the latest developments and thought leadership? Sign up for Basis Scout and we’ll send all the best digital marketing articles, POVs, and reports straight to your inbox each month.

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