The Future is Fluid for Agencies: How Generative AI is Impacting the Advertising Agency Business Model

Agencies with a culture of strategic thinking are well-positioned to succeed in this hybrid model since they possess a strong instinct to leverage it effectively, writes Chris Greenough.

The Future is Fluid for Agencies: How Generative AI is Impacting the Advertising Agency Business Model

Agencies with a culture of strategic thinking are well-positioned to succeed in this hybrid model since they possess a strong instinct to leverage it effectively, writes Chris Greenough.

In 2020, I wrote about how technology was on the precipice of changing the nature and value of self-identity. Since then, I have continued to see this play out. James Earl Jones has sold his voice to Disney; brands like Maybelline continue to launch digital avatars, and deepfakes continue to be a cause of deep concern.

Recently, deepfake photos showing Trump’s arrest flooded Twitter and now have over 5.5 million views. Just days ago, deepfake photos of Pope Francis wearing a Balenciaga jacket went viral and fooled millions of people.

So what should we make of all this, and what does the future hold?


 

The capability of generative AI

In recent month, generative AI, a type of artificial intelligence that is capable of creating original content or data, has become more prominent in the consciousness of ordinary, everyday consumers as companies like OpenAI, Midjourney, Runway, Adobe, Google, Microsoft joined the bandwagon—so to speak—and launched new or iterative products that should stun even the most sceptical observer.

This has far-reaching implications for all businesses and processes—the use cases for advertising agencies, in particular, range from content creation to enhanced personalisation, analytics, and even improving the briefing process.

The use cases are endless, but how will Generative AI ultimately impact the Agency model?

Let’s break down the types of agencies that can potentially emerge in the age of generative AI.


 

A Market For “Hand-Crafted Creatives & Codes”

As AI becomes more prevalent, there will be a growing demand for traditional, more humanised, “acoustic and pixel-imperfect” creative and coding services. Consumers will cling to more authentic offerings that are mostly “handmade” by humans and bring a personal touch. Agencies will offer a level of personal service that some clients will appreciate and output with a visceral feeling – similar to the preference for vinyl or hand-crafted artisanal coffee.

“The next Droga5 or Fjord will invariably be founded by highly disruptive and innovative marketing experts —but with one major difference: they will only need a few staff.”

Human nature’s anthropocentric bias towards AI art is still hard-coded in our system. Recent studies suggest that humans tend to be more biased and critical of work labelled as AI-made.

A study of 385 participants who reviewed poems written by AI and professional poets found it challenging to distinguish between the haiku penned by humans and those generated by AI. However, they gave lower scores to poems they believed were penned by AI. The same pattern was seen in studies where participants were presented with AI-generated vs human-made artworks.

Using the prompt “The Future is Fluid for Agencies: How Generative AI is Impacting the Advertising Agency Business Model”

Another feature of a ‘humans-only’ agency is an emphasis on data security. Highly regulated industries and markets are still navigating a cloud-first world, and it is not a stretch to imagine that creative and code output that relies on data outside of local servers may not be allowed.

However, this will ultimately be a niche market for a few niche agencies. Like products labelled as 100% handmade and organic, this model can have a unique selling point, but it will come at a higher price point. As such, it will not likely be the primary model of the future. So, let’s explore the other extreme.

Introducing The Infinite Agency

The next Droga5 or Fjord will invariably be founded by highly disruptive and innovative marketing experts —but with one major difference: they will only need a few staff. They can create large-scale ad campaigns, digital products and more with only their imagination and generative AI tools. It is very near possible today for a single person to make a feature-length brand film, a 20-page website or even 100 banner ads by themselves.

However, there are still challenges and existing loopholes to protect AI-generated works legally. The current rule published by the U.S. Copyright Office, Library of Congress states that creative elements generated by a machine are considered to lack human authorship and, therefore, cannot be registered for copyright protection.

“Procurement procedures will also have challenges in putting value on work done.”

Simply put, all work generated by AI using only prompts cannot be copyrighted. While the office launched a new initiative to examine the copyright law and policy issues around the use of AI including a series of public listening sessions, we still have a long way to go in defining what is and isn’t legally permissible.

Furthermore, the infrastructure around advertising agencies still takes work – receiving a brief, defining objectives, servicing an account, measuring results, and invoicing for work—these things take time and have yet to be fully automated. Even a person unbounded by technology will still be limited by what one person can do with the hours they have in a day

Procurement procedures will also have challenges in putting value on work done. In Asia, valuing work done by hourly rates and headcount is rampant. Thus, only a handful of more progressive businesses will see the value and want to work with the personalities behind AI. Ultimately, the Infinite Agency will also be a more niche model.

The Inevitable Hybrid Agency

This is where the herd is headed. Hot off the heels of implementing a hybrid office-remote workplace model, agencies are now working towards embedding processes that take advantage of a hybrid human-technology approach that will improve efficiency and productivity.

Image by Matheus Bertelli

Research suggests that employees who feel supported by technology are 2.3 times more engaged in their jobs. This underscores the significance of technology in enhancing employee engagement and productivity.

In the short term, agencies will need to be transparent in communicating with clients on what work is being automated and what isn’t. But, there are fundamental long-term shifts in the makeup of agencies that will cause challenges in adopting this model.

A Premium on Research, Insights & Critical Thinking

Generative AI still needs to be a more reliable research tool. It is not built to study in-the-moment consumer behaviour and sentiment and should not replace the rigour of the scientific approach. A recent study by Open AI on the impact of large-language models, like ChatGPT, on the workforce, found this to be true.

“We discover that roles heavily reliant on science and critical thinking skills show a negative correlation with exposure, while programming and writing skills are positively associated with exposure,” the study says.

“Research suggests that employees who feel supported by technology are 2.3 times more engaged in their jobs. This underscores the significance of technology in enhancing employee engagement and productivity.”

So, the “War For Talent” will shift from purely digital or technical skills to strategic ones. Agencies with an ingrained culture of thinking and strategy will succeed in using AI as a research tool. The ability to challenge ideas and stand out from commonality will set agencies apart.

By using prompts, account managers can save time on administrative tasks, focus on understanding client needs and connect strategy with execution while also learning new skills.

In a world that trains people to be more predictable with algorithms, having thinkers who can get to the ground truth and see beyond the average collective thinking AI has synthesised will be needed and highly valued.

“So the paradox facing not only agencies is how do you train for tomorrow without making redundant hires today?”

To innovate and disrupt, the intuition to adopt or go against what the AI has predicted requires a much more thoughtful and creative discernment. The ability to challenge ideas and stand out from commonality will set agencies apart.

It’s also a skill not all agencies are set up for. For example, many media agencies have focused on building specialised, siloed skill sets, some creative agencies are still set in traditional modes of production, and some technology agencies focus only on writing the code versus thinking about what they are making. Agencies with a culture of strategic thinking are well-positioned to succeed in this hybrid model since they possess a strong instinct to leverage it effectively.

The Paradox of Experience

Herein lies the final challenge for future agencies. Intuition and critical thinking are typically gained with experience, but many of the tasks AI replaces are more junior or inexperienced roles. It answers very tactical questions like “Give me ten ideas”, “Write 20 headlines”, “Check this code for errors”, and” Create a how-to document for handover.”

So the paradox facing not only agencies is how do you train for tomorrow without making redundant hires today?

One possible outcome may be a reversal of ageism that we have seen in the industry up until now. The old AdPerson may be a preferential hire compared to a fresh graduate when equipped with these new tools. But in the long term, agencies will need to prioritise building a culture and specific training programs to equip young talents with the mindset to maximise the opportunities generative AI presents appropriately.

“This will ultimately be a niche market for a few niche agencies. Like products labelled as 100% handmade and organic, this model can have a unique selling point, but it will come at a higher price point.”

In conclusion, the rise of generative AI is set to transform the advertising agency business model in significant ways. While there will be a market for agencies that offer hand-crafted, human-only services and for the “infinite agency” that relies solely on AI tools, the hybrid agency that offers services combining human talent and creativity with the power of AI technology is likely to become the dominant model.

However, this shift will require agencies to prioritise strategic thinking and address talent training to avoid making redundant hires. With the right approach and investment in training, the advertising industry has the potential to harness the power of generative AI and achieve greater efficiency and productivity while continuing to deliver creative campaigns that resonate with audiences.


Featured image by Deep Mind via Unsplash

 

 

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