Campaign recently reported that China’s brand advertising market grew 9% in 2024, yet agency-managed budgets shrank. The paradox is apparent: spending is up, but less of it flows through agencies. The forces reshaping the market—platform dominance, influencer-led commerce, in-housing, and the rapid adoption of AI—are structural, not cyclical.
For decades, agencies in China thrived on principal media buying, securing vast ad inventories upfront to command better pricing and unlock exclusive opportunities. This model gave agencies a seat at the table for strategic planning, media pricing, and creative innovation. Today, that seat is increasingly occupied by platforms and in-house teams.
The displacement of the old model
Influencer marketing is now the primary driver of budget shifts. Platforms such as Douyin have evolved from media channels into direct-to-consumer and direct-to-client relationships and marketplaces. A brand no longer needs an agency to source or manage talent. It can identify top influencers, negotiate directly, and even use AI to script and optimise campaigns, all without intermediary fees.
Platform-direct deals have compounded the change. Where agencies once bundled creators into annual media commitments, platforms now lead with influencer partnerships and include ad placements as an add-on. The platform has effectively assumed the role of negotiator and distributor.
China’s labour market has also made in-housing an attractive option. Mid-level marketing managers, earning $3,000 to $5,000 a month, now oversee influencer negotiations, AI-driven content production, and media buying in-house. Strategy and negotiations, once the high-margin core of agency work, are increasingly retained internally, leaving agencies with execution-only roles.
AI is eating into agency margins
AI is accelerating the shift. In China, AI is not positioned as a premium service; it is expected to be deployed without added cost. Creative adaptations, copywriting, and production, traditionally billable hours, are now automated, removing revenue streams overnight. Unlike Western markets, where AI augments human labour for a fee, Chinese clients view it as cost-free infrastructure.
Traditional, high-budget productions have been in decline for over a decade. The rise of influencer-generated content, AI-studios capable of delivering studio-quality output at a fraction of the cost, has made large-scale shoots increasingly rare. Brands now prefer content that feels authentic, performs well on social platforms, and is cost-efficient. AI will also reduce post-production, concepting, and adaptation-related fees by 90% or more.
The problem has always been getting advertising agencies to stop "introspection"— Free creative with media buy, 1% media buy rates to consolidate all under one roof, strategy comes free.
Where agencies still hold the line
While the strategic high ground may have shifted, agencies still hold value in operationally complex areas. Performance marketing, so real-time bidding, large-scale campaign optimisation, and cross-platform execution, remains a skill-intensive discipline.
As influencer programs scale into the hundreds of creators across multiple campaigns, the infrastructure and coordination capabilities of agencies will again become valuable. Agencies that combine B2B and B2C expertise, especially in a market where trade and consumer marketing are converging, can carve out a sustainable position. Influencers are the new digital media - complex, require extensive coordination, and perform variably that require consistent optimisation.
The Chinese advertising market is growing, but its structure is being rewritten. Agencies must adapt to survive. Small, agile “hot shops” composed of ex-agency talent are already gaining traction by integrating creative, media, and PR capabilities under one roof and moving quickly to meet client demands. The future of Chinese agencies will be integrated shops with very few headcounts, not the old “factories” of old that specialised in one practice.
Future success will belong to agencies that embrace AI-enabled production, master performance marketing at scale, and manage complex influencer ecosystems. Those who fail to pivot will find themselves displaced in a market they once dominated.
Humphrey Ho is the CEO of Helios & Partners.
