Earlier this month, shoemaker Bata announced that it has rebuilt its marketing operations in India around AI agents that write briefs, generate creative assets, publish content, and much more. The brand is no longer working with ad agencies or production houses but with an AI tech company, Zocket.
Consequently, the brand expects to see its marketing costs reduce by 80%, with nearly $1million in annual savings. The move puts into focus a longstanding question around the future of the ad agency. To be sure, brands have been experimenting with AI for a few years now, as seen in campaigns by Coca-Cola, Cadbury and Swiggy, to name just a few. As per industry reports, nearly all major advertisers in the country are using AI in some capacity for creative and marketing functions.
For the business leaders, the question is no longer, “Do we need an advertising agency at all?”. A more pertinent question is, “What kind of advertising partner do we need to compete in an AI-driven world?”.
Rohit Ohri, founder, Ohriginal, is clear that AI is not killing advertising. Far from it. It is killing the old advertising agency business model, particularly the expensive content factory funded by monthly retainers. AI can already produce adaptations, social posts, performance creatives and multiple versions faster and more cheaply than the traditional agency structure. Any agency whose value lies primarily in the volume of its output has reason to be worried. “We must distinguish between producing content and creating value,” says Ohri.
It is clear that AI is replacing the traditional billable-hour model with outcome-based pricing, shifting agency value from traditional content creation to sophisticated strategy and automated execution. Given that, Ohri says agencies must push the envelope on brand distinctiveness, pricing power, customer acquisition and more.
Naresh Gupta, co-founder and CSO, Bang In The Middle, believes the future will belong to projects and that the number of retainers will decline further. However, the risk with the growing influence of AI is in achieving creative distinctiveness. With every advertiser using similar algorithms and data sets, advertising for a high-end brand might look similar to, say, a massy brand.
“The desire, the imagery, and the heft are all compromised,“ says Gupta. “Agencies might no longer execute lower funnel creative work, but upper funnel work will continue to need agency intervention, human insight and creative magic.”
Back to the future
AI tools have raised expectations and as agencies scrable to invest in AI tools and upskill, experts dismiss any doomsday prophecies about immediate or large-scale job loss. Sandeep Goyal, managing director, Rediffusion, says that the agency has been extensively executing AI-led work across digital, TV and animation over the past couple of years. “We’ve been investing in AI since October, 2024. Last year alone, Rediffusion’s Aesthetic Intelligence executed AI-led work for at least 50 brands. As client mandates widen, we expect to have over 100 people in this company over the next three months,” he adds.
Goyal has also set up Rediffusion Narrative for content creation. “Our staff are all skilled in using as many as 42 different kinds of software, since the future will require more proficiency in AI tools. This will be the way forward for all agencies. Eventually, the technology will be inseparable from the advertising business,” he notes.
For the RK Swamy Group, set up in 1973, there has been much evolution in the face of a changing advertising ecosystem. S Nara-simhan, executive vice-president,
RK Swamy Group, says the company is no longer positioned as an ad agency but rather as an integrated marketing services group. Since its public listing in March 2024, the company has continued to invest in AI and in strengthening its capabilities across several functions from content creation to data and CRM.
“We have a team of over 4,000 people across seven locations, led by experienced specialists in their respective fields. This will only grow despite the AI hysteria. We invest extensively in internal and external training. Without skilled people, AI may produce more content that may not necessarily be more effective, thereby putting a brand at risk. Human intelligence remains essential to getting value from artificial intelligence,” argues Narasimhan.
The ad agency’s adoption of AI is not without challenges. The first undoubtedly is the cost. Agency leaders say that the cost of upgrading software and hardware is significant, at around ` 2 crore for just 10-15 machines. For network agencies that need to do this at scale, the cost is tremendous when added to human cost. For these agencies, the likelihood of downsizing and job losses is real, compared with independent Indian firms.
There are also legal hurdles, says Goyal. While legal teams for brands are obsessed about safety and copyright, senior leaders are apprehensive about backlash on social media surrounding the use of AI.
Net net, embracing AI is table stakes. It’s how agencies adopt AI that will separate the men from the boys.