[Column] Bart De Waele: Advertising agencies must reinvent their business model

In every agency I visit, there is one topic that dominates the meeting table: AI.

Will it change our profession? Yes. Will it make us redundant? Maybe.

AI is evolving faster than an agency owner trying to explain to a client why that retainer is still relevant. Where two years ago AI struggled to come up with a decent slogan, today it is a production machine that works faster than your most overworked intern.

According to McKinsey (2023), AI will automate up to 30 percent of all marketing work hours by 2030. But looking ahead to 2030 is already too late; the real shift will come within 1-2 years.

The Golden Age: Get on the AI ​​Train Now

Good news: Agencies currently have a temporary advantage over clients. But that window is closing fast. We have two concrete opportunities:

1. Efficiency gain : 10x faster, but how do you invoice that?

AI is dramatically accelerating agency work. According to Accenture (2023), generative AI can automate up to 40 percent of creative tasks. An AI copywriter can write an article in seconds that would take a human an hour. Generative AI can create visuals, code, and even strategy documents in a fraction of the time.

But there’s a sticking point: agencies still charge by the hour. What happens when a task that normally takes four hours suddenly takes four minutes? Are you still going to invoice for four hours? Or are you going to send 1-minute invoices to clients?

2. Education & Implementation : AI as a new branding tool

We can not only help customers with AI, we can also build new services around it. Think of brand-trained AI models that perfectly understand the tone of voice and house style of a brand. No more static PDF brand book, but an AI that generates real-time content in the right style.

Some early adopters are already showing how this can be done: Coca-Cola is working with OpenAI and Bain to develop AI creative tools for their marketing teams. Unilever is using AI to accelerate product development and marketing strategies.

If we don't offer it, our customers will soon do it themselves.

The big challenge: the agency business model is broken

The biggest problem? We still bill by the hour.

But AI doesn’t count hours. AI counts in computing power (CPU cycles).

The logic is simple: if an AI tool can work out a strategy in one minute that would take a human ten hours, you will soon be getting invoices for 250 euros for 60 seconds of work. Good luck with that conversation with the customer.

This is exactly why AI companies operate on a different pricing model. For example, at OpenAI, you can choose between different AI models: a reasoning model, a regular  model, a research model... Each of these models gives a different, more or less deeply or broadly researched answer. And each of them does this in the same time, within a minute. But each has a different pricing.

The marketing sector urgently needs to learn from this. If we continue to stick to hourly rates, we will slowly kill our own margin.

This is not about the mirage of value based selling .

We need to find a business model based on depth  of thought, not minutes. Diversify in price based on the use of human/artificial brains in whatever combination. Do you want a deeply researched and tested answer, dear customer? Or is a standard sufficient in this case? Or rather a completely unhinged unexpected insight? Same time effort, different brains used, different price points.

Which business models can agencies use?

No idea. That is exactly what we as a sector and as an agency need to think about. We need to be able to evolve towards a model in which the value of AI and human creativity is correctly calculated. Some possible paths:

1. AI-driven subscriptions & retainers

Clients pay for access to AI-driven services, such as automated content generation, strategic insights, and marketing optimizations. Example: An agency offers an AI copywriting service as a subscription service instead of billing per article.

2. The pay-per-result model

Instead of billing time, we charge based on output or impact. Example: Clients pay per lead, conversion or reach generated, instead of per hour of advertising strategy.

3. Partnership models with AI companies

Why use AI tools as a mere glorified Canva? Why not partner with AI companies to build custom solutions for clients? Example: An agency builds a custom AI tool for a brand that needs automated social media scheduling. The agency retains ownership and invoices via licenses.

AI replaces 80 percent of work. But that 20 percent will be worth gold.

For those who say, “AI can never replace our human magic!” We need to be honest with ourselves as an industry - much of what we do is good enough  and replaceable by AI. Yes, even that solid strategy and creation is in many cases the marketing equivalent of elevator music.

And that's okay. Sometimes good enough is good enough. FC De Kampioenen  also has an audience of millions.

According to a study by Harvard Business Review (2023), AI can already write 80 percent of a strategic marketing plan.

But that also means that the 20 percent of really strong creation and strategy only becomes more valuable. AI can serve the masses, but the real differentiator remains human.

Another organizational model

Perhaps we need a new organizational model for agencies. That could be a Shamrock model. No more square structures, but three fresh leaves and a sturdy stem.

Page 1 . That's us: the core, the crew, the backbone. Our own people, our superpower, our rock in the surf campaign.

Page 2 . Hollywood, baby! For every project we cast the right star cast: freelancers, partner agencies, experts - a dream team tailored to the production. No egos, but ego boosts for clients.

Page 3 . The AI ​​agents. Not from the FBI, but from the GPT. Always alert, always ready, and never sick. Only the occasional existential crisis when they don’t get a prompt.

And all this supported by a sturdy stem. Oiled with smart processes and a brilliant pair of glasses. One with which we look at the world differently. Sharp, surprising and with a wink.

Conclusion: Time to act now

We have another 1-2 years to get this right. After that, we will no longer be the AI ​​pioneers; we will be the agencies that missed the boat.

What should you do NOW?

Test AI applications within your agency - Where can you accelerate the process without losing value?

Experiment with new pricing models – Think CPU cycles, retainers or performance-based fees.

Teach your customers to use AI before they search - If you don't offer it, they will find someone else.

Invest in the 20 percent of premium creation that AI can't (yet) do - That's where the real value remains.

The clock is ticking. The question is not whether AI will change our profession. The question is how we will deal with it.

Will you be the agency that smartly embraces AI and builds a new model? Or will you be the agency that invoices clients for 1 minute of work?

Bart De Waele is Chief Network Officer van I Know a Guy

www.ikag.be