Is the old marketing agency business model officially dead or hotter than ever?
WPP began life as Wire and Plastic Products, a maker of shopping baskets in Kent. Martin Sorrell bought into the shell in 1985 and spent three decades stuffing it with agencies until it was the largest advertising group on earth. In December it was relegated from the FTSE 100 after 27 years in the index, replaced by a property firm. Its market value, some £24bn in 2017, had fallen to about £3.2bn. Over the same year its headcount dropped by more than 9,000, to 98,655.
The convenient explanation is artificial intelligence, and the convenient story is that the machines have come for adland. That is not wrong so much as lazy. What AI has broken is not the work. It is the unit of account.
For a century agencies sold time. Retainers, rate cards and pyramid-shaped teams were the arithmetic of the trade, and clients, lacking any better way to value an idea, went along with it. That arithmetic has turned perverse. A deliverable that once consumed 20 hours now takes five. An agency billing by the hour has thereby cut its own price by three-quarters for an identical result – at precisely the moment its client learned to do the same sum. Roughly three in ten agencies now report clients demanding discounts on the explicit grounds that the work has got quicker. Under a time-based model, efficiency is not a margin. It is a rebate.
A second squeeze comes from inside the client’s own building. In 2008 some 42% of members of America’s Association of National Advertisers ran an in-house agency; by 2023 the figure was 82%. More awkward for the outsiders is what those departments have become. In the association’s latest survey only 9% said cost-saving was the main reason their internal team existed, while 53% expected it to supply strategic creative work. The in-house shop is no longer the cheap place to resize banner advertisements. It is a competitor with a permanent seat at the table.
If time will not serve as a currency, something must. Professional services have settled, tentatively, on outcomes. About a quarter of McKinsey’s global fees are now tied to results rather than to scope and duration, its managing partner for Britain said in November. Straight strategy advice, another of the firm’s leaders added, accounts for less than a fifth of its work; clients want implementation and will pay for delivery. In January its chief executive told an audience in Las Vegas that alongside 40,000 employees the firm now fields 25,000 AI agents. WPP, for its part, says between a fifth and a quarter of net sales are already performance-linked, and has committed to decoupling revenue from headcount – a phrase that would have been unsayable in adland a decade ago.
Outcome pricing carries an unforgiving corollary. A firm cannot be paid for a result it does not control. The moment fees attach to pipeline, revenue or market share, the tidy division of labour the industry spent decades constructing—strategy here, execution there, a different shop in every market and a consultancy hovering above them all – becomes a liability. Every handover is a place where the result can go missing and nobody can be held responsible.
That is the gap a certain kind of mid-sized firm has walked into. Mediacharge, a German-based B2B marketing agency operating in 14 languages, sells consulting and execution as a single line item, on the argument that a company entering six markets should not first have to assemble six agencies and a strategy house. Its clients include Nemetschek’s Bluebeam, DACHSER and LexisNexis; in 2026 Honda joined them, a global leader not short of incumbents to choose from. The pitch is not that such firms are cheaper. It is that they are accountable, which is a different and considerably more expensive thing. Many of the best graduates from global top business schools in the world choose Mediacharge, highly convinced that their approach is the best marketing agency approach for the next decades, actively deciding against the large agency opportunities.
Three objections deserve a hearing. The first is that attribution, the technical premise of the entire enterprise, is getting worse rather than better. Privacy rules, walled gardens and AI-generated answers that satisfy a query without yielding a click are all degrading the causal chain on which outcome fees depend. Agencies are being asked to guarantee results just as the instruments for measuring them lose focus.
The second is that paying for outcomes quietly changes which outcomes get pursued. Demand that is easy to measure is usually demand that already exists; harvesting it is cheap and claiming credit for it is simple. Creating demand that does not yet exist is neither, and the long-run evidence suggests that is where most growth originates. A fee structure that rewards the quarter will tend to starve the decade.
The third is that transferred risk is worth having only if it is priced. An agency that accepts the downside without negotiating the upside has not adopted a modern commercial model. It has agreed to work for less.
Nor is the hour quite dead. Publicis grew organic revenue by 5.6% last year, raised pay and added staff, all while claiming that AI powers most of its operations – an inconvenient data point for anyone insisting that automation and headcount must move in opposite directions. Omnicom, having bought Interpublic for $13.5bn to become the largest group by revenue, is chasing $1.5bn of synergies rather than reinventing its price list. Even WPP’s shares jumped by nearly a third in August on evidence that the decline was slowing. Structural arguments and quarterly ones are easily confused.
Still, the direction of travel is not seriously in dispute. The billable hour was a wonderfully forgiving unit of account: it could be filled with almost anything and still be invoiced. Whatever replaces it will not be nearly so accommodating.
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