Advertising agency stocks, battered this year amid fears that artificial intelligence could replace much of their traditional work, may still be able to turn the disruption to their advantage, analysts say in a Bloomberg report.
A major stock-market theme of 2025 has been the decline in shares of companies seen as vulnerable to advances in AI, with advertising agencies among the hardest hit. Britain’s WPP Plc has fallen about 60% this year following contract setbacks, while rivals Publicis Groupe SA and Omnicom Group Inc. have also slipped, though by a lesser extent.
The selloff has been driven by concerns that AI tools could automate creative and production tasks, reducing the need for agency services. However, some analysts quoted by Bloomberg argue that agencies will remain critical as brands navigate an increasingly complex, multi-platform advertising environment. That view has pushed analyst recommendations for Publicis and Omnicom close to their strongest levels in years.
“The industry is being disrupted, but it’s not being disintermediated — I think that’s the key,” said Morningstar analyst Mark Giarelli.
AI-powered tools such as Google’s Nano Banana and OpenAI’s Sora 2, which generate images and videos from text prompts, have gained traction this year. Coca-Cola Co. aired a Christmas commercial produced by AI for the second consecutive year.
At the same time, Big Tech firms are increasing pressure on agencies. Alphabet Inc. and Meta Platforms Inc. have rolled out tools that allow brands to design advertising campaigns in-house, reducing reliance on third-party consultants. In September, cybersecurity firm Palo Alto Networks Inc. said it created an entire advertising campaign internally without using external agencies.
Still, analysts say agencies retain strengths that technology platforms cannot easily replicate. While Google and Meta can offer ad creation tools, they cannot help brands efficiently allocate budgets across multiple channels, according to Giarelli. Agencies, he said, can help prevent duplicated spending across platforms such as Instagram Reels and Google Search.
That expertise is rooted in decades of consumer behavior data, dating back to the era of direct mail campaigns in the 1980s. “Ad agencies are quite good at understanding a variety of characteristics. They know where we are, what we’re thinking to some degree, and they’re able to tailor a marketing message based on that,” Giarelli said.
The advertising landscape is also becoming more complex, with AI enabling highly personalized digital content to be created almost instantly for individual consumers. This trend is likely to reinforce the strategic role of agencies, according to Bloomberg Intelligence analyst Matthew Bloxham.
“There is going to be a strategic role for agencies,” Bloxham said. “With more complexity, you want more valued advice to help you navigate through, whether that’s the overall marketing strategy or media strategy.”
