100 days ago, I wrote about "The Great Compression". Well now we have the receipts, and it's happening faster than I had expected.
The latest Gartner CMO Spend Survey reveals a sobering reality: 39% of CMOs are now actively planning to reduce agency budgets due to AI tool improvements. This isn't speculative futurism, it's happening today, with over one-third of marketing leaders already taking concrete steps to slash agency relationships, streamline rosters, and renegotiate contracts.
What's driving this acceleration? A perfect storm of factors:
Stagnant Marketing Budgets: Overall marketing budgets remain flat at 7.7% of company revenue, creating intense pressure to do more with less
AI Tool Maturation: The first wave of clunky AI tools has evolved into genuinely useful solutions delivering measurable efficiency
Proven ROI: The experimental phase is ending and 22% of CMOs now explicitly state that AI has reduced their reliance on external partners for creative and strategy
The timeline is compressing. The capabilities many thought were years away are already handling work previously requiring armies of agency specialists.
The most alarming aspect? The same percentage of marketing leaders (39%) are also looking to cut labour costs in their own team through "simplification or headcount reductions." This means the compression isn't just squeezing agency relationships, it's transforming how marketing operates, making leaner teams bolstered by AI the new normal.
The Three Response Patterns
As I observe how marketing leaders and agencies are responding to this acceleration, three distinct patterns have emerged that I update again here. Which one is you?
1. The Ostriches (Destined for Extinction)
Some agencies continue burying their heads in the sand, dismissing AI as "just another tool" while making only superficial adjustments to their models. They're focusing on incremental efficiency improvements when the market demands complete reinvention.
These agencies still believe their creativity and strategic thinking are uniquely human advantages that AI cannot replicate. But client budgets don't care about philosophical arguments—they follow results. And increasingly, those results are coming from AI-powered alternatives at a fraction of the cost.
2. The Adapters (Racing Against Time)
A second group recognises the existential threat and is frantically trying to integrate AI into their workflows and deliverables. They're training teams, restructuring processes, and attempting to create hybrid human-AI service offerings.
While this approach shows awareness, it often lacks the fundamental reimagining required. These agencies are essentially attaching jet engines to stagecoaches—making traditional agency models faster but not fundamentally different.
The problem? They're competing against purpose-built AI platforms designed from the ground up for this new reality, not retrofitted to accommodate it.
3. The Transformers (Building New Models Entirely)
The third group (a small but growing minority) is abandoning traditional agency models altogether, building entirely new approaches around AI as the primary production engine with human expertise focused on the uniquely human elements that still matter.
These teams aren't just using AI tools, they're reshaping their entire economic model, talent strategy, and delivery approach around what AI can and cannot do well. They're developing new value propositions that acknowledge the reality of what clients can now do themselves with AI.
The gap between these three groups is widening daily. The transformers aren't just winning new business, they're creating entirely new categories of marketing services that make traditional agency models increasingly irrelevant.
The Uncomfortable Truth About Value Migration
Let's be brutally honest about what's happening: the compression isn't just squeezing budgets, it's forcing a massive value migration in the marketing ecosystem.
Value is flowing away from:
Manual production and implementation
Templated strategic thinking
Experience-based intuition
Labor-intensive content creation
Human-only quality control
Value is flowing toward:
Orchestration of AI-powered systems
Uniquely human creative leaps
AI-augmented strategic insights
Curation and prompt engineering
Human-AI collaborative workflows
This isn't just about doing the same things for less money, it's about fundamentally different capabilities becoming valuable while others become commodities. For more on this topic, I highly recommend following the brilliant Caroline Johnson of TBMC.
What This Means For You
If you're an agency leader, the 39% statistic should trigger immediate action. This isn't a distant threat but a current reality reshaping client expectations today. The window for gradual adaptation is closing rapidly.
If you're a CMO or marketing leader and reading this, you're likely already among the 39% looking to reduce agency dependence or will soon face pressure to join their ranks. The question isn't whether to leverage AI to reduce external costs, but how to do it while maintaining (or improving) marketing effectiveness.
Either way, there are three immediate actions to consider:
Conduct an AI Value Audit: Systematically evaluate which aspects of your marketing function or agency model can be enhanced, augmented, or replaced by current AI capabilities—not theoretical future ones. Be ruthlessly honest.
Develop a Human/AI Operating Model: Define a clear framework for where human expertise adds unique value versus where AI can drive better, faster, or cheaper outcomes. This isn't just about efficiency but about optimising the entire marketing function.
Reimagine Talent and Partnership Strategy: As value migrates, different skills and partner relationships become critical. Start building these capabilities now before competition for AI-savvy talent and partners further intensifies.
The Path Forward
The great compression isn't something that will happen in the future—it's already underway and accelerating. The question isn't whether your team will be compressed, but whether you'll control the compression or be controlled by it.
Those who recognise this moment as a fundamental shift rather than a temporary disruption will not just survive the compression—they'll emerge stronger on the other side, having built more resilient, responsive, and effective marketing capabilities.
The others? They'll join the long list of organisations that clung to old models until it was too late, wondering how they missed the signs when they were hiding in plain sight.
What side of this compression will you be on?
Brandflow is written by Justin Billingsley, who has spent his career on all three sides of the industry's table: senior client, global agency leader, technology founder. First published 22 May 2025 in the Brandflow newsletter on LinkedIn.