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The rise of Gen AI and phase-out of services: What does the future hold for digital agencies?

The rise of Gen AI and phase-out of services: What does the future hold for digital agencies?

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Over the past two decades, digital agencies have played a vital role in offering clients solutions in terms of user experience, acquisition target tracking, social, mobile and data gathering.  

However, the lines between different types of marketing have begun to blur since the rapid evolution of internet-linked technologies such as generative AI, leaving pure-play digital agencies with the reality of digital sameness and commoditisation, according to one prediction for 2024 from Forrester Research.  

Don't miss: Study: Gen AI takes 62% of total marketing technology budgets 

A Capgemini Research Institute report also revealed that 47% of organisations globally have allocated teams for the implementation of generative AI (Gen AI) in marketing campaigns in 2023. In fact, organisations are already investing in generative AI for marketing and have dedicated 62% of their total marketing technology budget towards it. 

Which services from generalist digital agencies will die? 

As the landscape continues to change and evolve, agency services most at risk are routine, repetitive tasks ripe for automation such as basic content creation, data analysis, and campaign optimisation, according to Nathan Petralia, former managing director, Merkle Hong Kong.

"By strategically letting go of service offerings that can now be handled more efficiently by AI, agencies can redirect resources towards developing high-value capabilities requiring human ingenuity - creative ideation, strategic thinking, and technology product development,” he added. 

In terms of customer experiences, agencies have been struggling with the human limits of how many variations of the marketing message their rare talent can make with limited time and money, to allow customers to expect more fresh messages across various platforms frequently, according to Rachit Dayal, former CMO, APAC, Merkle.  

“So the entire marketing industry hasn't been able to be as dynamic and multi channel as they need to be[...] Generative AI can finally enable marketers to truly design the message in formats and frequencies that consumers want to see,” he added. 

On the creative front, human designed campaign services will shrink while human curated, AI generated multi channel campaign services will grow. In terms of media side of digital agencies, generative AI has the potential to either engage or disinterest consumers from key consumption platforms, said Dayal.  

Furthermore, operational, repetitive, tactical services are most at risk of disruption, such as trafficking, localisation, A/B(/n) testing, campaign optimisation, according to Ruben Schreurs, chief strategy officer, Ebuiquity.  

What does the future hold for digital agencies? 

Given the shortening of life span of marketing trends as we enter the new digital age, we might see the emergence of agency strengths and specialisms that we’re not used to seeing, such as AI Personality Designers or VR Experience Designers, according to Penelope Siraj, principal consultant at R3.  

In this aspect, digitally native agencies have an advantage over the other agencies, as they have a fundamental understanding of the digital landscape, tools, and processes, and what needs to be done with the applied use of new tech across functions, Siraj added. 

True enough, we are not yet near a stage in AI innovation where the people wielding the tools do not matter anymore. As long as (digital) agencies invest in re-skilling their people where needed, and adjust their service models, this is an opportunity for independent companies. 

“Their service models must evolve, sure, but digital agencies have an opportunity to offer speed, efficiency, and specialist quality to clients in a way that will be more difficult for their larger full-service peers,” said Ebiquity's Schreurs.  

“We will likely see a consolidation in the industry with high volumes of strategic acquisitions, but new specialists will emerge in their place.” 

To stay competitive in this fast-evolving environment, agencies must shift from a service-centric approach focused on manual tasks, to one that provides integrated solutions amplified by technology, said Petralia. 

"This evolution requires phasing out outdated service offerings that are misaligned with the emerging AI-driven marketing landscape," he added. 

Meanwhile, Gary Cheung, general manager, NP Digital HK and Taiwan said agencies may need to shift to a more consulting role, work as a business partner, rather than just being hired to execute campaigns but the future for digital agencies is still exciting and full of opportunities. 

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