Kate Ross, Group MD of Eight&four Group, delves into the impacts of generative AI (Gen AI) on SME marketing agencies, highlighting major industry shifts and the challenges faced by smaller players against the backdrop of significant investments by larger networks in AI technology.
Gen AI: Opportunities and Threats for SME Marketing Agencies
June 10, 2024
Kate Ross, Group MD of Eight&four Group, addresses the significant impacts of generative AI (Gen AI) on SME marketing agencies and explores the industry’s current dynamics.
Industry Landscape
In a span of five years, Sam Altman, CEO of OpenAI, predicts that 95% of marketing tasks will be automated by AI. This shift poses serious challenges for SME agencies like Eight&four, a UK-based digital marketing network with 130 employees, as larger networks invest heavily in AI technology.
Large Network Investments
Major players such as BrandTech Group recently secured a €115 million Series C funding round for AI technology investment. WPP and Publicis have committed €300 million each to develop proprietary AI platforms over the next three years. These moves aim to create an automated end-to-end marketing process.
Impact on SME Agencies
SME agencies face several acute pressures:
1. Competition: Network agencies now compete for smaller accounts, altering the competitive landscape and possibly using loss leader strategies.
2. Walled Gardens: Platforms like Publicis’ CoreAI integrate more closely with clients, potentially reducing the number of agencies a client uses.
3. Technical Capabilities: Technical prowess now outweighs creativity, challenging SMEs to reorient their business models towards R&D and AI infrastructure.
Eight&four’s Adaptation and Future Scenarios
Eight&four has developed Platform12, including Coach, a Gen AI image generation tool used by clients like Hyundai and Candy Crush. However, smaller budgets limit their capacity for continuous innovation. Potential industry outcomes discussed by Ross include:
1. Partial Automation: Limited impact if AI tools are not fully adopted.
2. Network Dominance: Larger networks might dominate, with niche consultancies surviving.
3. Complete Automation: AI may fully take over, potentially rendering traditional agency models obsolete.
User Concerns Over AI Data Usage
Recent updates to Adobe’s Terms of Use have raised concerns among Creative Cloud users. The changes suggest that Adobe might use user data to train its AI models, including Adobe Firefly. Despite this, Adobe clarified that it does not use customer content to train AI models and reiterated its dedication to data privacy.
Conclusion
Gen AI represents both opportunities and immense challenges for SME marketing agencies. The rapid evolution in AI technology and significant investments by large networks are reshaping the industry, pressuring SMEs to innovate while maintaining flexibility in an increasingly automated market.
