The majority of new-to-market small businesses in 2026 are bypassing traditional agencies, favoring self-serve AI tools within Meta and Google, both of which are heavily invested in the technology.
By Hadi Khatib
There is a seismic shift underway in the advertising industry as AI matures from a mere buzzword into a crucial operating system and advertising component for global commerce. A platform-centric evolution is being driven at unprecedented data scale: Big Tech’s AI systems are fed trillions of real-time audience behavioral signals, fostering hyper-personalization and outpacing traditional segmentation and manual optimization methods.
In 2026, the “battle” is about who controls the most efficient algorithm and the cleanest first-party data. Mark Zuckerberg, CEO of Meta, said during a January 2026 earnings call: “We’ve reached a point where the AI generates the creative, targets the audience, and optimizes the budget in real time better than any human-led team.”
AI Platform Takeover
The 2026 global advertising market is expected to surpass $1.3 trillion, driven by “closed-loop” AI platforms led by the “Big Three” retail market players—Alphabet, Amazon, and Meta—which will control nearly 60 percent of global ad spend, according to WARC’s 2026 Global Ad Trends.
According to WARC Media’s Future of Commerce 2025 report, retail media ad investment is projected to reach $197 billion in 2026.
Recent media reports show that AI-powered “generative search” (Google SGE) has resulted in a 15 percent increase in CPC (cost per click) and a 30 percent increase in conversion rates, driven by AI-led referrals. This has prompted brands to divert budgets away from traditional display advertising.
The majority of new-to-market small businesses in 2026 are bypassing traditional agencies, favoring self-serve AI tools within Meta and Google, both of which are heavily invested in the technology.
Google, for instance, has expanded AI personalization into shopping interfaces powered by its Gemini models, integrating dynamic promotions based on conversational AI interactions.
Philipp Schindler, chief business officer of Google and Alphabet, said in a December 2025 interview: “The transition to ‘Gemini-first’ advertising means agencies are moving from being media buyers to being ‘data shepherds.’”
Meanwhile, WPP Media invested around $384 million in AI technology and data strategy in 2025, according to its 2025 Annual Report & Results.
Mark Read, CEO of WPP, said during a year-end address: “AI is our new co-pilot, but it is not the pilot. Brands don’t just want efficiency; they want cultural relevance, which an AI cannot yet feel.”
Publicis Groupe expanded its AI and data acquisitions, spending significant sums on AI-driven personalization and data infrastructure, reaching $545 million in 2025 alone, according to the company’s AI ecosystem and investment tracking report.
Not All Is Well With AI
As platforms automate, new risks have emerged. Forbes reported on a global YouGov survey that found roughly half of consumers say AI-generated ads are a turnoff when identified. “AI slop” refers to digital content created with generative AI that is perceived as lacking effort, quality, or deeper meaning.
Yannick Bolloré, chairman of Havas, said this January: “Authenticity is the currency of 2026. As AI floods the world with synthetic content, the human-led, meaningful creative produced by agencies has never been more valuable—or more expensive.”
Adweek has noted that audiences are showing signs of diminishing trust and authenticity fatigue related to AI content, prompting brands to rethink their AI strategies.
Still, Business Wire reported that IDC projects AI, as a whole, could contribute around 3.5 percent of global GDP by 2030 through its economic effects, including indirect and induced value from adoption across industries.
While AI-led platforms have won the battle for efficiency and distribution, agencies are winning the battle for differentiation and trust, where creativity is measured not only by the volume of ads produced but by the human connections they foster.
The Workforce Squeeze
According to McKinsey’s 2025 Global AI Survey, 32 percent of organizations expect workforce reductions in the next year due to AI adoption across industries, including media and advertising.
According to PyxelJam, an AI video production company, AI video tools can cut production costs by up to 70 percent for advertising videos compared with traditional human-led efforts, largely by eliminating location, crew, reshoots, and post-production expenses. At the same time, demand for AI talent is rising. Meta has offered exceptionally large compensation packages to attract leading AI researchers and engineers—reportedly ranging from tens to hundreds of millions of dollars, CNBC reported in 2025.
Sam Altman, quoted in AI First (OpenAI), said: “Ninety-five percent of what marketers use agencies for today will easily be handled by AI.”
Agency Pressure Cooker
Search advertising—paid ads on search engine results pages—is expected to reach approximately $390 billion in 2026, according to Statista. Marketing Week reported that social media advertising alone accounted for roughly 25.8 percent of global ad spend in 2025.
These trends place enormous pressure on traditional agencies to defend both relevance and revenue share.
Retail media, powered by AI and first-party data, surpassed traditional television advertising revenue for the first time in 2025, with $178 billion in spending, according to WPP.
Doug Herrington, CEO of Worldwide Amazon Stores, said in an October 2025 report: “By leveraging AI to close the loop between a seen ad and a confirmed purchase in milliseconds, Amazon is capturing the intent that traditional agencies used to spend months researching.”
Does this spell the death of agencies? “It’s not the death of agencies. It’s the death of outdated agency models,” said Patrick Garvey, co-founder of We Are Pi, summarizing the challenge facing the industry—perhaps for the better.
Try telling that to their current employees.
