The advertising and communications industry is facing an existential crisis, and the hard truth is that they have no one to blame but themselves. 

For decades, agencies have operated under a misguided notion: that their primary product is time. By breaking down high-value strategic counsel into measurable units and selling it by the hour—often disguised as a comfortable monthly retainer—the industry has systematically commoditised its own brilliance.

Time is indeed a precious commodity but selling it as a proxy for expertise was a fatal strategic error. 

When you sell time, you invite clients to scrutinise hours rather than outcomes. You position your agency not as an irreplaceable strategic partner, but as a vendor of labour. And in an era where technology can replicate labour at a fraction of the cost, that positioning is a direct path to irrelevance.

The commoditisation trap

Commoditisation as we all know is the act of turning something of subjective or unrealised value into something of quantifiable value. By selling time, advertising agencies have effectively turned their intellectual property into a physical commodity, no different from corn or pork bellies. 

When strategic counsel is broken out from an agency’s offering and the remaining services are priced by the hour, those services become too similar and available from too many sources to command a or any price premium.

The result? A race to the bottom. Clients issue massive RFPs, inviting dozens of agencies to pitch speculatively, knowing they can simply choose the cheapest alternative. When a prospect sees a dozen identical alternatives to your agency, you have zero ability to command premium pricing. The competitive advantage is stripped away, leaving agencies to battle over who can provide the most hours for the lowest cost.

Some lessons from other industries

The advertising industry is not the first to fall into the time-based billing trap, nor is it the first to suffer the consequences. The legal fraternity has long been anchored to the billable hour, a model that is also facing a severe reckoning. As automation and artificial intelligence transform service delivery, clients are shifting their expectations from paying for the time of the best lawyers to paying for guaranteed results at a predictable price. 

AI-native law firms are disrupting the market by offering fixed fees and outcome-based pricing, making the traditional billable hour look like a liability and a strong signal of inefficiency.

Similarly, the accounting industry is actively shifting away from hourly billing. Accounting firms have realised that hourly billing inherently limits earnings and forces them to sell time rather than outcomes. Clients don't buy time; they buy results. So, by transitioning to value-based pricing, accountants align their incentives with their clients' success, rewarding efficiency rather than penalising it.

The PR industry's survival advantage

While advertising agencies have clung to the time-based retainer, the public relations industry has arguably positioned itself better to weather the storm. PR agencies typically structure their pricing around specific deliverables and activities—such as media relations, press releases, crisis management, and thought leadership—rather than just raw hours. 

They are able to quantify their output and not their input.

The activity-based model ties the PR agency's compensation more closely to tangible outputs and outcomes. While PR still utilises retainers, those retainers are often explicitly linked to a defined scope of deliverables rather than a vague bucket of time. This simple but crucial difference makes the PR services harder to commoditise and provides a clearer value proposition to the client.

The AI implosion: A dual threat

If selling time was a slow leak in the advertising industry's hull, artificial intelligence is a torpedo. AI has fundamentally altered the landscape by attacking both the time and expertise zones simultaneously.

Firstly, AI is eradicating the value of time. Generative AI tools can produce copy, design visuals, and analyse data in seconds—tasks that previously required hours of human labour. Advertising agencies are projected to replace a high double digit of jobs with automation by 2030, with entry-level and repetitive roles being eliminated entirely. When the marginal cost of execution approaches zero, pricing based on time becomes utterly indefensible.

Second, AI is denting the perceived value of expertise. As AI models become more sophisticated, they are increasingly capable of generating strategic insights and creative concepts that rival human output. The barrier to entry for 'good enough' advertising has plummeted, further eroding the agency's competitive moat. If an agency's primary value proposition was the speed and volume of its output, AI has already won that battle.

Back to the complacency of the retainer model

This brings us to a painful question: Did the retainer model make the advertising industry too comfortable?

The predictable recurring revenue of the retainer model created a false sense of security. It allowed agencies to maintain the status quo, avoiding the difficult conversations about value, outcomes, and true strategic differentiation. It enabled mediocrity to persist, as agencies focused on fulfilling hours rather than driving transformative business results.

This complacency is a known killer. History is littered with the corpses of dominant companies and industries that chose comfort over courage.

Consider Kodak, a company that actually invented digital photography but failed to embrace it because doing so meant dismantling its wildly profitable film business. They knew the future, but they chose to protect their existing business model instead of disrupting themselves.

Blockbuster faced a similar fate. They had the opportunity to acquire Netflix and were aware of the shift toward streaming, but they hesitated. They couldn't bring themselves to disrupt their own model built on physical stores and late fees.

The taxi industry, too, grew complacent behind regulatory moats, refusing to innovate or improve the customer experience until Uber and Lyft decimated their market share in less than a decade.

In every case, smart people saw the disruption coming, but legacy structures and the fear of cannibalising existing revenue paralysed them. 

Incremental change doesn't work when disruption demands transformation.

The hard choice ahead

The advertising and communications industry is at a critical inflection point. The era of selling time is over. The devices and technology have won the battle for efficiency.

To survive, agencies must reclaim the strategic high ground. They must transition from selling hours to selling outcomes, from being vendors of labour to being indispensable partners in business transformation. This requires the courage to abandon comfortable but obsolete pricing models and the conviction to price services based on the immense value they create.

The self-destruction of the advertising industry is not inevitable, but it is imminent if they do not change course. Will they be the architects of their own renaissance, or will they be the next Kodak, clinging to their timesheets as the world moves on without them?

The author is the global head - growth and consulting, Acorn Management Consulting, 4As and AAMS Council Member and heads DIA Brands Malaysia.