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What hasn’t the world thrown at agencies of late? Years of economic instability: Check. Mounting signal loss: Check. The explosion of generative AI, rising rates from media partners, reduced client budgets, and media fragmentation: Check, check, check and check.
Despite these pressures, most agency leaders remain optimistic, with 82.4% feeling confident about the future of their businesses. Still, the ongoing upheaval is taking its toll on agency staff: Over seven in 10 agency professionals say their jobs have gotten harder in the past two years, and more than half say that digital advertising in general has grown more difficult in that same time span.
But times of change often provide opportunities for significant growth and innovation, and agency leaders can leverage the forces reshaping the industry to gain a competitive edge over those who may be more hesitant to embrace those shifts. The question is, how can they approach this evolution thoughtfully and strategically, despite the many unknowns?
To find out, we spoke with five industry veterans about what agency leaders need to know in this moment, and how they can situate their organizations to not only adapt as the industry transforms, but thrive in this new environment.
April Weeks | Chief Investment & Media Officer - Basis: Three come to mind: The 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 the demand for a deep understanding of privacy-compliant advertising solutions, as well as Google’s new approach to consumer choice, as an alternative to third-party cookie deprecation. Amidst these challenges, agency leaders are also tasked with balancing business growth, navigating a rapidly changing marketing landscape, and increasing client pressures.
Katie McAdams | Chief Marketing Officer - Basis: Fragmentation and the proliferation of platforms required to execute and manage media have advanced at a pace that agencies are struggling to keep up with. To stay competitive, they often need to add headcount and increase costs. At the same time, agencies are under pressure to drive profit, growth, and media spend.
Ryan Manchee | SVP, Brand Marketing - Basis: In-housing and talent recruitment/retention are two of the biggest pressures pushing agencies to evolve. 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. This puts pressure on agencies to try and do more for less at a time when many are already struggling to drive profitability.
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 junior- and mid- level employees to complete intense work that isn’t the most inspiring. What’s more, many agencies are also pushing for a return to the office, which is not always a popular move among employees. These factors combined are enough to push a significant number of future agency leaders to switch industries.
Mike Olson | EVP, Client Development - Basis: 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. 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.
On top of that, on a macro level, the economy is causing some paralysis. It’s not that the economy is “bad,” per se, it’s just that there’s a lot of uncertainty around it. For example, the outcome of this year’s presidential election will impact future rate cuts, so that’s a big factor of uncertainty right now. In this context, I think brands are slow playing some of their spend to figure out where they need to put their attention and effort to capitalize on their ad spend.
AW: Embrace a test and learn approach, where you can 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.
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 can also help increase brand memorability and drive culture by aligning a brand’s products or services with cultural moments, like the Olympics or the Super Bowl. 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: The number one priority for agencies these days is top line growth. In general, employee growth and employee experience have taken a back seat to financial stability. And of course, making sure revenue turns into profit is incredibly important, because if you don’t do that you can’t even have an organizational culture.
However, to drive this growth, agencies can’t lose sight of their talent. There’s an old adage that, “Your most valuable assets get in the elevator and walk out the door every day.” Agencies must maintain focus on their talent, because ultimately, those are the people who are going to help them keep their clients and win new clients to make that top line growth happen.
Workplace culture is key to retaining top talent, but certain trends are eroding it. Return-to-office mandates have been met with resistance, while the increasing reliance on freelancers and contractors challenges the long-term cohesion of teams.
Agencies must nurture working environments that allow their best employees to continue to iterate on how to achieve success differently. By keeping their 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.
Lauren Johnson | Client Strategy & Effectiveness Lead - Basis: Brands’ marketing teams are more stressed than ever. They don’t have the budgets they need to meet their goals; they are expected to be experts on all things media; and they are under pressure to navigate the noise of an increasingly complex landscape.
This stressed state means brands are looking for more than just agency partnerships that can activate media. They are looking for strategic partners that make them smarter and more confident in their marketing decisions. At the same time, they want smart, simple solutions that cut through the noise and resonate at the executive level.
Moving into 2025, agencies must commit to providing meaningful business-level partnerships that help clients navigate through all the complexity and upheaval that characterizes the industry today. Forward-thinking agencies will be using every engagement to share how advertising is impacting their clients’ business, offering up new solutions backed by innovative thinking, and elevating client conversations beyond lower-level topics—such as short-term KPIs and allocating budget into different media channels—that don’t hold weight with bigger business conversations.
AW: Business growth and creating operational efficiencies are certainly top of mind. Everyone seems to be focused on what they can do to create cost savings and efficiency within their business, while also continuing to meet increasing client needs and growing revenue.
The business problems facing agency leaders are complex. However, understanding the value of technology in solving these challenges is essential. As agencies evolve, reducing dependencies on legacy systems and dated workflows will be a critical step to creating efficiency, meeting client demands, and driving business growth.
MO: A few topics are at the forefront of my conversations with agency leaders. How to win larger clients is a big one, 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 also 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.
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. Leaders should also reduce efforts to try and “boil the ocean,” which tends to end with results that are just OK.
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.
AW: AI- and automation-driven tools will reshape how deliverables are created as well as their associated timelines for creation, and job descriptions will continue to 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 employees’ time from low-value to high-value tasks. Within the last twelve months, we’ve experienced exponential growth in AI tools that can deliver meaningful impact to day-to-day business operations, allowing teams to rethink how they prioritize their time and efforts. Through these changes, it is likely we will see opportunities to explore new ways of monetizing the agency/client relationship.
KM: Generative AI is having a moment right now, but I think marketers are settling into the fact that genAI, like anything else, is a tool, and we need to be smart about how we incorporate it into our workflows. It can be a great starting point for spurring creativity and saving 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.
KM: After spending years preparing for the deprecation of the cookie, agencies were ready to shift away from audience targeting and move back towards relying on their creative and storytelling to drive performance. Although Google has halted the cookie’s death, I think the conversations and preparation done leading up to that moment have shone a light on the fact that 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: I agree with Katie: We cannot ignore creative—it’s the cornerstone of any successful ad campaign. AI can help build units quickly, conceptually developing captivating creative is a unique skill set that's innately human.
Also, growth at all costs is no longer a winning strategy. Intentionality on profitability is critical. 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. 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.
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 investing in the wellbeing and retention of agency staff, prioritizing creative, and investing strategically in AI- and automation-driven tools designed to make teams more efficient while allowing them to focus on more strategic and fulfilling tasks. By leaning into these strategies, advertising leaders will position their agencies to thrive in a rapidly evolving landscape, stay ahead of competitors, and foster a culture of innovation that keeps their teams engaged and their clients satisfied.
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There’s so much more to explore when it comes to the current state of advertising agencies and how they’re set to evolve in the coming years. To dive deeper, we surveyed advertising industry professionals from across the US to find out how they feel about their jobs, their agencies, and the current trajectory of the digital advertising industry. Discover all the top insights in our 2024 Advertising Agency Report.