This story is part of Ad Age’s Future of Advertising 2030 series exploring how marketing, media and creativity will evolve over the next five years.

Advertising agencies are in the process of setting strategies for the next five years despite numerous unknowns—the impact of AI, speed of consolidation and increasing ease of in-housing among them. These variables may have wide-reaching impact, including the potential demise of mid-size agencies, that marketers should be preparing for now.

On Ad Age Insider, Ad Age reporters look at the future of ad agencies and strategies that industry leaders are putting into place now to prepare.

“A lot of [agencies’] executional work becomes commoditized by AI, and a lot of marketers will have pretty robust in-house systems. So the real value and agency lie in their strategic thinking and being able to bring an outsider perspective to the equation.” –Ewan Larkin, agency reporter, Ad Age

Ad Age Insider podcast transcript

Parker Herren, host: How will the agency landscape transform by 2030? What has surprised you guys the most in your reporting on the future of agencies?

The demise of mid-size agencies

Brian Bonilla, senior agency reporter: It’s hard to be surprised, but I would say something that might surprise people in general—the role of the mid-size agency might go away by 2030, meaning we’re already seeing a lot of small, independent agencies get a lot of business, but we’re now starting to see those same agencies competing with each other and competing with large agencies and seeing a leveling of new business opportunities. And at the same time, mid-size agencies, which typically range from like 100 to maybe 250 employees, are competing with large holdco networks of like 5,000 employees for the same business. 

So by 2030, you’re going to see those mid-sized agencies either merge with other entities or sell to private equity firms or things like that. That’s going to be something that might be surprising for a lot of people, and I think will happen quicker than people realize.

How agency structures will shift

Ewan Larkin, agency reporter: This is interesting. For a couple of years, agencies have been trying to market themselves as consultants, and it hasn’t really stuck. To some degree, it has, but I think it’s obvious they are still service providers fundamentally. But I actually do think now we might see that shift start to stick a little bit. A lot of the executional work becomes commoditized by AI, and a lot of marketers will have pretty robust in-house systems. So the real value at agencies lies in their strategic thinking and being able to bring an outsider perspective to the equation. 

I think that puts them in direct contact … with the likes of Deloitte Digital and Accenture Song. So the focus for agencies really should be building up some of those consulting capabilities and commerce consulting capabilities. Agencies like VML are already starting to do this. They rolled out a unit earlier that encompasses consulting, CX and other things, and that already accounts for about 40% of their overall global revenue. So, I expect more people to make moves like this. This is one of the early stages of holding companies really being able to package up one of those offerings.

Parker: For Ad Age’s Future of Advertising package, media reporter Brandon Doerrer wrote about 2030 readiness. And chief technology reporter Garett Sloane dug into the 2030 tech stack. That sounds pretty thrilling. What did you guys find in your reporting?

Brandon: People tend to think that there are just going to be more and more integrated accounts, especially between creative and media. The walls are really coming down between those two functions. We are seeing brands increasingly hire the same agency to handle both of those functions. So, agencies are going to need to get used to those two functions not being in silos anymore, not having walls exist between those two teams.

Garett: We’re already starting to see these roles change. We’re seeing shifting ways of billing clients, different business models, different services agencies have to cater to. So, it’s already happening. It’s going to happen more and more where agencies are going to have to operate as platforms and services that can interact with brands and help brands build their ad tech stacks, acting as consultants, acting as facilitators into this futuristic landscape.

That’s where agencies need to go, and they’re starting already by developing new products and services. Whether that will work is still an open question, and if they can adjust and change—some will, some won’t.

The social AOR resurgence

Parker: Let’s talk influencers. Gillian Follett covered the future of the social and influencer space. Is there any way the future of influencers will impact agencies in 2030?

Gillian: Experts that I talked to for the story said that they predict the spectrum of influencer agencies will stretch to the extremes. So, we’ll see more brands working with influencer functions within larger holding companies, or we’ll see brands looking to very specialized boutique agencies who specialize in specific platforms or types of creators, like gaming creators, for example.

We’re also going to continue to see influencer budgets increase, not at the same meteoric rate that we’ve seen over the past couple of years, but based on forecasts from intelligence companies like eMarketer, it’s definitely on an upward trajectory. 

We’re also seeing a resurgence of social agency of record assignments from brands across different categories. Something that I spoke to one marketer about was this idea that it’s not just the brands that are trying to target Gen Z or want to be social-first anymore that are looking for social AORs. It’s brands that they wouldn’t expect, like more established legacy brands are looking for social AORs. And a lot of these brands are seeking the insights that social media can provide in terms of what consumers are looking for, the types of products that they’re craving and using social as the foundation for their marketing campaigns rather than having social be a tacked-on piece at the end.

Parker: Okay, Lindsay, I’m going to let you round out this group with some intel from your reporting on the RFP process in 2030.

Lindsay Rittenhouse, senior agency reporter: Within the RFP process, agencies are going to have to stop the theater—the glossy presentations, the pitch decks, and really showcase how you’re working as a team. Get ready to be in more chemistry meetings—enough with the showboating and the theater in the pitch.

Parker: Tell us how marketers should begin preparing for that now.

Lindsay: Well, they have to set up the process so that there are more chemistry meetings and more time for the meatier stuff, the interviewing, the briefings, the working together, and just get rid of some of the processes. You don’t have to do these massive pitch presentations. [Marketers] are the ones who set the process for the RFP, so don’t allow the theatrics.

Agencies in 2030—how to plan ahead

Parker: I want to hear everyone’s advice for how marketers or agency leaders can begin prepping for their 2030 strategy. Why don’t we just go round robin, starting with you, Brian.

Brian: Start thinking about what type of agency model do you want as a marketer. We’re seeing roster agency models become way more popular, meaning instead of having just one AOR handle everything, I’ll have a social agency here, I’ll have a creative agency here or I’ll have a roster of five creative agencies. 

If you’re an agency, start thinking about what model makes the most sense for you to be in—should I be more niche or should I broaden my capabilities? And as a marketer—same question but on the flip side. If I’m going to be spending less on marketing, but I’m expecting to have more outcomes, what is the best model that makes sense for my external partnerships? Because I do think agencies will still be necessary as much as we’re talking about in-housing and things like that.

Ewan: They need to clarify which functions they want done in-house, which ones they need outsourced, very clearly defining what they can do themselves versus what is essential that they get from an external partner. There is a push for efficiency, and, obviously, everybody wants to save costs, so they want to bring it in-house, but you are going to need an external partner. You always do need that outside perspective. So, very clearly define what needs to be done yourselves and what you need an agency for. 

But rethinking agency relationships in general—they’ve always been seen as providers, that’s what they are, but now a lot of them are going to be actually helping build those internal capabilities. So identify which agencies are high-level strategic thinkers, which ones really understand your brand and your challenges, which ones can help me build my internal chops. Those are the ones that I think are likely to have long-term value.

Brandon: On the agency side of things, if you’re a creative agency and you don’t already have media capabilities, really digging in and evaluating if it would be worth building that out. If you have a unique angle, something to offer brands to make yourself stand out from the plethora of media agencies that can do the same thing. Media is probably in a similar boat. At least having an understanding of various creative processes is going to be helpful.

On the marketer side of things, brands can just not be afraid to ask. I did a story not too long ago about how indie creative agencies can respond to requests for media services. And the reason why agencies are starting to think about either building these capabilities internally or which media agencies they can partner with is because they’re getting these requests. Marketers—don’t be afraid to ask if you have an indie creative shop that you’re working with that doesn’t do media. They’re getting used to getting that question already, and they are starting to think about how to best answer that question. So, no dumb questions is the advice.

Garett: They could start developing the services and tools, and some are. We’ve seen agencies launch AI agents—the trading bots that they can all of a sudden potentially give out to brands to start to use. A lot of these tools that agencies are building are internal, but eventually, they’re going to make them external and start shipping them to brands to use as part of their suite of services. So, agencies start building internally and then will start giving it out to the masses.

Gillian: Brands should start considering whether they want to look to agencies to help them with sharpening their social strategies to adapt to this new way of seeking consumer insights from social and using social as a starting point for marketing. For some brands, it might make more sense to develop a social media team in-house to lead these efforts for the brand. Some brands have sought social media agencies of record because of the wide range of functions that are involved in social media marketing today, like paid social, creator marketing, social media intelligence gathering. There’s just a lot that goes into it these days.

Brands should start considering whether that’s something they can do in-house, or if they need to find partners to help them develop those strategies as social becomes more and more important.

Key Takeaways

• Mid-size agencies will likely disappear by 2030, either merging or selling to private equity firms
• Agencies are shifting from ad makers to consultants and platform builders
• Creative and media functions will merge as brands increasingly hire one agency for both services

Hopefully making a ruckus, one blog post at a time!

Be sure to check out my other blog, Joe’s Journey, for selected short stories and personal insights on life and its detours.