After meteoric post-pandemic performance, agencies’ earnings have returned to pre-pandemic, single-digit levels while AI investments skyrocketed to $92 billion during 2022 and $50 to $60 billion year-to-date in 2023. The next wave of growth hinges on agencies’ ability to shift their economic model in order to capture the full potential of AI within their processes, capabilities, and structure. In 2024, agencies face recasting their services-based model into a solutions-based one — comprised of creativity and technology products. All agency types (creative, media, PR, digital, and in-house) will feel the impact of pairing people with technology. As a result, Forrester predicts that, in 2024:
- Bespoke brand algorithms will power agency offerings. In the future, brands will buy the algorithms that their agencies build by training AI-powered marketing engines with multiple first- and third-party audience signals, historical media performance, and creative content — personalized for each client. Forrester calls these bespoke brand algorithms “brand language models.” They are brand-specific applications of AI technology that use base models like Meta’s Llama or OpenAI’s GPT that leverage insights from audience signals and layer in a company’s branding, fonts, colors, tone of voice, and IP. Brand language models are the engines that create brand-specific, personalized marketing based upon human creative ideas combined with machine precision and speed.
- Agency reviews will increase as fear of AI mismanagement grows. Agencies and marketers will be left to self-govern AI marketing practices until the US and EU enact AI legislation, expected by 2026. This will make business leaders nervous. Sixty-one percent of AI decision-makers are concerned about privacy and data protection that might violate laws such as the GDPR, and 57% are concerned about the misuse of genAI’s outputs leading to errors. As a result, 2024 will see more accounts up for review as marketers look for safe AI implementation to control the reputational fallout from mismanaged AI marketing executions.
- Digital agencies will disappear from the industry landscape. As generative AI shapes more conversational, personalized experiences, this will effectively recast all marketing as “digital marketing.” This means that there will be little need for specialized “digital” agencies. All agencies will ready new AI services to produce brand experiences. This leaves pure-play digital agencies with the reality of digital sameness and commoditization. As the supervillain Syndrome from “The Incredibles” says, “When everyone is super, then no one will be.”
Balance Automation With Augmentation
Traditionally, artificial intelligence connotes automation leading to employee displacement. Technologies such as robotic process automation, deep learning, computer vision, and intelligent automation have shown potential to automate 25% of agency roles. But genAI lends itself more to employee skill set augmentation. Our agency AI forecast for the US shows more agency roles benefiting from the influence of generative AI and only 7.5% of agency roles being automated by the end of the decade. The pairing of people with AI platforms will set the pace for how creative industries negotiate room for efficiency and effectiveness, as the WGA and major Hollywood studios did in recent contract negotiations. Agencies should aim to balance the cost efficiency that marketers are looking for with the increased volume and impact of human creativity, augmented by AI.
B2C Marketers: Leap Now, Not Later
The AI era for agencies is in full swing as experimenting with generative AI progresses to implementing it — leveraging the speed, intelligence, scale, and creativity that it provides. 2024 will witness both ups and downs as marketing executives, agency leaders, procurement professionals, and technology providers work to commercialize agencies’ embrace of AI and the transformation that it enables.
Start Planning Today For What’s Coming Tomorrow
Forrester clients can access our full Predictions 2024: Agencies report. If you would like to further discuss implications, please schedule a guidance session with me. Be on the lookout for my next report that details AI adoption for marketers, set to publish later in Q4 and coauthored with Lisa Gately.
If you aren’t yet a Forrester client, you can download our complimentary Predictions guide, which covers our top predictions for 2024. Get additional complimentary resources, including webinars, on the Predictions 2024 hub.