In the past six months agency holding companies have announced some of the largest rounds of cost reductions to their businesses the industry has seen.
In February WPP announced targets of $500m in annual savings by 2028, and in the same month Omnicom announced a target of $1.5bn in cost savings with $900m planned for 2026 alone.
As these agencies re-model from a horizontal structure to one that is vertically integrated and more efficient, there are important considerations for marketing procurement teams on how these cost reductions will impact existing and future agency client / agency relationships.
1. Team structure and staffing.
Naturally, cost reductions inevitably impact overall headcount. Current anticipated headcount reductions reach into the thousands within individual agency groups.
If agency groups consist of teams already committed to client delivery, how do headcount reductions impact client servicing teams and how can advertisers mitigate risk?
Clarity on the composition of your agency team is crucial. Understanding the roles applied to service your account, the amount of access you will get to specific agency specialisms, or how different levels of agency staff will interact with your internal stakeholders, are all fundamentally important prior to any potential impact on your team. Specifically, understanding the process for replacement of individuals on your account is key.
2. Principal Media Trading.
Businesses under significant cost pressure will naturally lean into ways to protect profitability and margin. Whilst many advertisers are ahead of this, over 25% said their current MSA does not contain clear processes for how the use of non-disclosed media should be approved (source: WFA & Ebiquity ‘Transparency: Media agency MSAs’). With the increased use of principal media trading seen across most agency groups, how can marketing procurement teams protect their businesses media investments to ensure transparency over how their media is transacted?
Understanding the value and drawbacks of principal media trading is a first step, together with agreeing mutually agreed definitions with your agency. Further, advertisers should ensure they have contractually committed audit rights, and transparency on any savings achieved through principal media trading.
3. Offshoring and Outsourcing.
A trend in agencies of all sizes for many years has been the increasing use of offshoring and outsourcing to reduce staffing costs. Headcount reductions and cost pressures will increase this trend. If your teams are moved offshore, or to a subsidiary, how does this impact the day-to-day performance of your account?
Establishing clarity on roles and functions and how those are delivered is a first step. If functions are being delivered offshore, or through an outsourced company, ensure you have sight of SLAs and input into how those are defined and governed.
4. AI and Platforms.
Technology adoption should drive efficiency for businesses looking to achieve cost savings targets. Coupled with the development and rapid roll-out of AI across industries, agency groups are placing their technology and data capabilities front and centre of their GTM strategy. If an increasing proportion of agency work is being delivered by AI, either through platforms or by agents, what should procurement teams expect the impact to be on agency remuneration?
The basics here include first establishing a fully transparent model for media trading, one that discloses all technology and data fees involved in activating your media buys.
The second focus should be on how agency owned AI tools and platforms are being charged beyond media buying as above. This is a dynamic and evolving space with various pricing models possible,including token-based pricing, seat licensing, or subscription tiers. Procurement teams should ensure pricing models are clearly defined in their agency contracts.
Governance over how client data is used within agency AI systems is also crucial, particularly establishing your level of risk where agency AI systems might be using your data to train their models.
The new world of vertically integrated Marketing Operating Companies is a positive move for advertisers. Removing the legacy complexity of multiple agency brands under one holding company umbrella is more efficient and focuses attention on core agency capabilities.
Consequently, as our Global MD of Marketing Transformation David Muldoon recently outlined “internal integration is critical. If media, creative, ecommerce, and data teams remain siloed within the client organisation, a single holding company structure only mirrors existing fragmentation”.
Marketing procurement teams that tackle the above challenges have a unique opportunity to transform their agency relationships at a time of significant structural change. Doing so ensures they position their businesses to realise the growth potential of AI adoption, agency vertical integration, and media efficiencies.
