When the Subsidies End

Remember when you could take an Uber in a metro area ride for less that $10? Or when AirBnb was a clearly more convenient and cost-effective alternative to a hotel?

Having the world adopt these was a heavily subsidised effort. The goal of the firms was user growth, not revenue, and they were awash in VC cash to subsidise them.

Once the behaviours are in pattern, and after market share chasing has settled down, the focus turns to revenue and returning the cost of the capital invested, and price increases kick in.

Importantly, the prices rise to where they should always have been if they were priced to the utility value of the service. It is not that prices are increasing, but that capital-funded subsidies are eroding.

The same is happening now with the adoption of GenAI and LLMs. The utility value of their use far exceeds the cost to use them. For individuals that’s brilliant - shop around, experiment, enjoy. But for businesses that are using these services as a critical part of their value chain? Are you ready for the price to match the utility, as the investors in these services expect a proper return?

What is the main implication? If you are using AI to do something simply faster and cheaper, you are in trouble. You need to be doing something better.

It’s a common C-suite refrain at the moment: AI delivering "faster, cheaper, better" results across their operations. But when pressed on specifics, the conversation reveals an uncomfortable truth: 90% of their ROI calculations focus on faster and cheaper—the two dimensions most vulnerable to competitive commoditisation.

Faster becomes table stakes within months, cheaper evaporates when capital subsidies end, but better—true competitive differentiation through AI—remains largely unexplored.

Every AI transformation story follows the same narrative arc: faster execution, cheaper delivery, better results. But competitive dynamics and economic reality reveal why only one of these dimensions offers sustainable advantage:

Speed advantages disappear faster than any other competitive benefit. When one agency delivers presentations in 2 hours instead of 8, competitors adopt the same tools within weeks. The productivity baseline shifts industry-wide, and speed becomes the new minimum expectation rather than a premium differentiator.

Meta's internal analysis leaked in March 2025 showed that process automation advantages typically become industry standard within 4-6 months of adoption. Faster isn't competitive advantage—it's survival requirement.

The AI-driven cost savings that are celebrated exist because of artificial pricing, not sustainable economics. AI platforms are following the exact playbook that transformed multiple industries:

This isn't sustainable pricing—it's customer acquisition strategy funded by investors expecting monopolistic returns. The Uber/Airbnb pricing trajectory awaits: celebrate the savings now, absorb the increases later.

(Note: I've had people at pains to explain to me that as compute scales, this need to price up will ebb. That math doesn't work for me, when just this year Microsoft, Alphabet and Meta have announced $320Bn in capital expenditure alone)

True competitive advantage through AI isn't about doing the same things faster or cheaper—it's about doing fundamentally different things that create superior client outcomes. But "better" requires strategic intentionality that most agencies haven't developed.

The platforms understand something you too often don't: operational efficiency is commoditisable, but strategic differentiation through AI creates switching costs and pricing power.

1. Beyond faster and cheaper, what specific client outcomes can we deliver that competitors can't replicate?

2. How do we develop proprietary AI-human methodologies that create switching costs for clients?

3. What strategic insights emerge when we combine AI data analysis with human market intuition?

4. Which of our current "efficiency gains" could become competitive differentiation through strategic application?

The teams that thrive through the coming pricing transition won't be those celebrating the biggest cost savings today. They'll be those who recognised that faster and cheaper are temporary advantages, then invested in building "better" capabilities that justify premium positioning when economic reality returns.

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 31 July 2025 in the Brandflow newsletter on LinkedIn.