It has certainly been an eventful 2025 so far in the agency world. A year that started soon after Omnicom announced its planned takeover of Interpublic has been followed by a widening gap in the performance of the agency groups.
That has culminated in recent weeks in the sooner-than-expected departure of WPP's CEO Mark Read after a profit warning and news that Dentsu has appointed two investment banks to explore the sale of its international business, two years after I first wrote in this column for Campaign Asia-Pacific that Dentsu must seriously consider the idea.
As a historian by training, I am always slightly wary of grand narratives, but I do think Lenin's quote that "there are decades where nothing happens; and there are weeks when decades happen" is a pretty fair assumption of how history works in practice.
Ask the average informed person in London, Berlin, Paris, Vienna, or St Petersburg on 1 June 1914 whether the whole of Europe would erupt into war within 90 days, and the answer almost certainly would have been no.
Wild scenarios can become accepted reality surprisingly quickly. It is both a frightening and liberating thought.
Thankfully, I do not think such a catastrophic event will engulf the agency space. Still, I believe the agency landscape on September 1, 2027, will look significantly different from what it looks like today. The ultimate driver of this will be the fundamental shift in the business model, and the catalyst for that change will be AI.
I am a cautious sceptic of the ultimate power of AI , but the simple fact is that it is here, agencies are using it and that it is already starting to change how ads are produced and campaigns run.
One of its side effects is likely to be to change the compensation structure for agency groups. A compensation model that is effectively based on time and/or cost-plus (in reality, the two are linked) makes little sense when AI can produce more or less the same work for most campaigns in a fraction of the time involved and with far less human impact.
Agencies are moving more towards output-based remuneration structures, and that makes more sense, but this should be seen at the start, not the end, of the process.
This will have more impact than what many believe or can imagine. Finance ultimately dictates most industries' and companies' actions.
In the agency space, it is no coincidence that the emergence of the big holding groups took place at a time when the compensation agreements were shifting away from commission-style agreements, which had allowed many smaller firms to thrive, to a cost-plus model, where scale counts not only because of the efficiencies generated but also because bigger firms have more access to capital, which enables them to make transformation deals.
Expect the same level of disruption here. One can speculate about the names involved but there is no doubt it will drive further consolidation, particularly amongst mid-tier players but also specialist smaller players who are likely to become valuable assets as holding companies look to differentiate (and I would also expect more independent players to emerge).
My view is that Publicis and a merged Omnicom-Interpublic are probably where they need to be but others need to decide on their strategy.
More positively, I also see this change as an opportunity for the industry to recalibrate itself in terms of the current model to something more sustainable.
Ian Whittaker is the founder and managing director of Liberty Sky Advisors. He writes a regular column for Campaign about the advertising landscape from a financial standpoint. It is not investment advice.
