For decades, advertising agencies have had a relatively simple way of costing their work. Estimate the people required, estimate their time, add overhead and margin, and arrive at an agency fee. Even where clients pay a retainer or fixed project fee, people and time often sit somewhere underneath the calculation.
AI changes the arithmetic.
A copywriter can generate and explore dozens of creative directions in the time previously required to develop a handful. An art director can visualise concepts before a production team becomes involved. Strategists can synthesise research, analyse competitors and interrogate customer data dramatically faster.
That sounds like an extraordinary productivity dividend for agencies such as Ogilvy, DDB, Leo Burnett and Saatchi & Saatchi.
But who gets it?
If an advertising campaign that previously required 500 agency hours can be developed in 250, should the client pay less? Does the agency retain the difference as margin? Do creatives work fewer hours? Or does the agency simply produce twice as much work?
There is an even more uncomfortable question. What happens when clients acquire many of the same AI capabilities themselves?
The problem is particularly acute in advertising because time was never a particularly good measure of creative value in the first place. A copywriter who arrives at the winning line in twenty minutes hasn’t created less value than one who takes two days. An advertising idea that transforms a brand isn’t twice as valuable because twice as many people attended the brainstorm.
Yet much of the agency business model has historically required some relationship between the cost of people, the time they spend and the fee ultimately charged to the client.
AI weakens that relationship.
The obvious response is to move further towards outputs, fixed fees, retainers, licensing, performance incentives or other forms of value-based remuneration. But that creates another problem: agencies then have to become much better at answering a question that time conveniently avoided.
What is creativity worth?
AI may make advertising agencies extraordinarily more productive. But productivity isn’t necessarily the prize if your commercial model depends upon selling the inputs that AI is eliminating.
Perhaps the biggest AI challenge facing the advertising industry isn’t whether machines can become creative.
It’s whether agencies can stop charging for the time it takes humans to be creative.
That last line is where this version earns its own existence. It isn’t merely the accounting article with accountant replaced by copywriter.
And semantically it’s loaded without looking loaded: Ogilvy, DDB, Leo Burnett, Saatchi & Saatchi / advertising agencies / agency fee / copywriter / art director / strategists / campaigns / clients / creative / brand / advertising industry.
If LinkedIn can’t recognise Advertising Services from that, our hypothesis has a problem.