WPP’s CFO Joanne Wilson said in a recent statement to analysts that a commercial model where agency fees are linked directly to measurable business outcomes such as sales growth will enable the firm to “decouple revenue from headcount.” Simply put, the company is looking at a gradual shift from billing based on hours and manpower, and is instead looking to demonstrate value in driving business objectives for clients.
The clamour for a rejig of the agency remuneration model is also growing in India and is in line with global trends. A global study from the World Federation of Advertisers (WFA) and MediaSense from November 2025 shows three-quarters (75%) of the advertisers expect to change their agency remuneration model within the next three years.
When enforced, the shift would be dramatic for an industry that has for decades billed clients based on hours and effort. It is unclear when WPP will roll out this new model, but industry leaders are calling it a move in the right direction. Says Rohit Ohri, founder of Ohriginal, “The shift towards outcome-based remuneration is a significant and necessary step forward. For too long, agencies have priced their work based on inputs – hours, resources, and deliverables – while the real value they create lies in impact.”
Most advertisers employ a hybrid remuneration model using a combination of commission, labour/time and performance-based fees. “Agencies will now be expected to clearly articulate and demonstrate the impact of their work,” he explains, adding that the success of this model will depend on how collaboratively outcomes are defined and measured.
The rapid changes defining the advertising ecosystem, with automation and AI playing a bigger role, also necessitate this shift. Experts note that agency costs are largely people-driven. Manpower accounts for an estimated 70% of the cost. However, the rise of AI has significantly reduced time by at least 30% in certain processes and tasks, thereby breaking the hourly billing model and compelling agencies to put skin in the game.
Nandini Dias, strategic advisor, independent board director and former CEO, Lodestar UM, points out that outcome-based remuneration is not entirely new. Directionally, it is good, as it rewards effectiveness, not just activity. “However, in India, full scale adoption will be challenging due to attribution complexities and limited data transparency. The model is more viable in digital and e-commerce, performance marketing, like search, social, and lead generation business. Where it will struggle is in areas like brand building, long term equity creation, storytelling, etc. as this has a lag period which can be across several months or years,” explains Dias.
For example, in the auto sector, if a car sells, it is difficult to isolate whether success is from product design, brand image built over many years, ease of servicing, mileage, advertising or media strategy. “A more practical path is a hybrid model, similar to portfolio management services or alternative investment funds – a base fee with performance linked upside beyond agreed thresholds,” she argues.
Shifting gears
The new pricing model could possibly also be a shot in the arm for the advertising business across the world and in India, which has been reeling from AI disruption, shrinking ad budgets, growing staffing costs and media fragmentation. For an industry that has not been adequately compensated for its impact in driving business objectives and growth for brands, observers believe this is a much-needed shift.
However, as Ashish Bhasin, founder, The Bhasin Consulting and former CEO, Asia Pacific, Dentsu explains, one of the biggest concerns affecting agencies today is the dearth of good talent. The industry doesn’t have the same kind of talent it did a couple of decades ago. Ad agencies are now confronted with a “chicken-and-egg situation”.
“Only when clients pay better will agencies be able to get great talent and offer them greater value. At the moment, the industry is in a negative spiral. Large network agencies managed by well-funded holding companies will have to sacrifice short-term profitability and invest in good quality talent and technology. Instead, they are doing the opposite, sacking large numbers of people. It’s great to remove the fat but they’re also cutting muscle,” laments Bhasin, noting that the industry is losing good talent to AI companies that are willing to pay top dollar.
The industry has a long way to go before arriving at an appropriate pay model, says Naresh Gupta, co-founder and CSO of independent agency Bang In The Middle. “With purchase departments driving the compensation for agencies, outcome-based compensation is never the metric discussed, especially with agency relationships becoming transactional and short-term,” he explains, noting that his agency prefers to stick to annual retainers and project fees.