Tech Giants' new AI AD instruments threaten major agencies

Copyright © HT Digital Streams Limit all rights reserved. Patrick Coffee, The Wall Street Journal 4 min Read 12 Jun 2025, 06:19 pm ist Meta CEO Mark Zuckerberg said last month that brands would no longer need creative services -the domain of the large agencies -which once released its more mature AI ad tools. (Photo: Reuters) Summary large companies will eventually follow young ones in using AI to create advertising campaigns – undermine the agencies that have ruled the business for years, analysts say. Technical and media companies’ race to automate advertising poses a threat to the giant agency that holds companies that have dominated decades that work, according to industry analysts. Share prices of agency networks, including Publicis Groupe, Omnicom, WPP and Interpublic, dropped by about 3% to 4% last week to a Wall Street Journal report that Meta platforms intend to release AI instruments by the end of 2026 that automate the entire process to create and place. Most of the businesses have recovered some or all the losses in the days since then. But Google and Amazon also follow Meta in developing new instruments to help advertisers automate more creative work on their own platforms. And Comcast, parent of NBCuniversal and the Peacock Streaming Service, plan to provide a free AI-powered tool this summer that will automate creative production for advertising on streaming TV, a spokesman said. Their efforts crystallize a long -term challenge for the agencies’ business, says Michael Nathanson, an analyst at Moffettnathanson, a share firm Moffettnathanson. Agencies have invented customers through employees for hours, but over the past few years I have experimented with compensation linked to the outcomes, as their own use of AI has speeded up their work. These experiments will have to expand for agencies to remain competitive as soon as brands have access to powerful creative instruments, Nathanson said. Meta’s plan is a reminder “of the risks surrounding these creative industries that are many human capital businesses, with the model based on an invoice model with a time page,” he said. “That doesn’t mean they are doomed, but that means the way they have to change has to change.” Full Creative Automation enables marketing teams on the part of the brand to handle on their own campaigns while looking at their agency partners, mainly for strategic guidance, says Jessica Serrano, head marketing officer of Dig, a chain of restaurants with a table-to-table theme. According to Serrano, who previously held senior marketing roles at Burger King and Taco Bell, technology such as the proposed products of Meta will attract the most for startups and smaller businesses. “If I had an e-commerce business with one to three employees, I would be very excited about an instrument like this,” she said. AI is more likely to displace agencies focusing on so -called performance marketing, as the tools are better equipped to bring consumers to a specific action, such as clicking on a link or downloading an app, than to conceive campaigns that define a brand, Serrano added. “If agencies do not develop quickly about this, they will be left behind,” she said. Agencies may not be easily replaced. According to Chris Beresford-Hill, chief creative officer at the Storide Creative Agency BBDO, part of Omnicom, it is less likely to entrust large advertisers who place heavy emphasis on brand perception, their campaigns to algorithms. “One thing I know about working with the big brands, which is definitely the bread and butter for agencies like mine, is that they want consistency and management of brands,” says Beresford-Hill. “Ai may be able to create a visual or even create a video, but the idea of ​​developing a unique concept seems far -fetched.” The gap can provide agency networks, at least in the short term, said Youssef Squali, head of Truist Securities Internet and Digital Media Research Group. But bigger and larger advertisers may start experimenting with AI instruments as they become more sophisticated. “Maybe some middle -sized companies will say,” Hey, to the extent that we can improve our return on advertising spending, if we can cut costs, yes, we will do it, “he said. Certain industries may be particularly attracted to the idea of ​​creating ads entirely in the home with AI. James Hill, who worked with marketers such as LVMH and Armani, said that luxury fashion brands that lowered the costs in response to the slowdown of sales in key markets such as China have already started experimenting. Gucci, part of the luxury group of Kering, released an advertisement in February that was made entirely with AI to promote his latest collection. And LVMH, parent company of brands such as Givenchy and Dior, mentioned this month AI key to address the broad slowdown and diminishing question. Meanwhile, beauty giant L’Oréal announced a collaboration with the Chip Powerhouse Nvidia to set up his work with artificial intelligence in areas, including advertising. Meta tried to secure agencies on their future -even when it built its AI ad instruments. Last month, CEO Mark Zuckerberg received a setback when he said that brands no longer needed creative services as soon as Meta released its more mature AI advertising tools. CMO Alex Schultz quickly cleared LinkedIn that Meta did not want to replace agencies. “We believe in the future of agencies,” Schultz said in a post. Meta is indeed working with different agencies while developing its latest AI products, a spokeswoman said this week. The important role agencies play “will be more important than ever” as marketing develops, the Meta spokeswoman said. “We are proud to work with them on some of the most exciting areas in advertising today, such as generative AI and business messages.” Nevertheless, the largest advertising businesses will have to reduce in response to a technology that speeds up the commoditization of their services, says Nathanson, the analyst. “You no longer need a 1000-person team,” he said. “You need three or four wonderful people with a vision.” Some investors agree. Shareholders remain skeptical of Omnicom’s proposed acquisition of rival IPG because they consider it a bet on the existing operating model, Nathanson said. Both companies’ share prices have fallen about 20% since the agreement was announced in December. Write to Patrick Coffee at [email protected] Catch all the industry news, bank news and updates on live currency. Download the Mint News app to get daily market updates. 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