A new industry report by advertising technology company Basis has found that 87% of agency professionals believe the traditional agency model is either already broken or will be within the next three to five years, reflecting growing pressure from artificial intelligence, tighter margins and operational inefficiencies.
The findings, released in the Basis 2026 Advertising Agency Report, are based on responses from more than 200 advertising professionals. Among senior leaders, the concern was even sharper, with 92% of agency decision-makers saying the traditional model is no longer sustainable.
“Basis’ 2026 Advertising Agency Report illustrates an industry in flux, where operational complexity, economic pressure, and AI-driven disruption are forcing agencies to rethink how they work, how they deliver value, and how they are compensated,” said Ryan Manchee, SVP of Brand Marketing at Basis.
“As the agency model transforms, the question now is what tools, technologies and practices these businesses will use to refit and remodel. While AI can be a business accelerator and force multiplier for agencies, it is only effective if it operates on advertising systems that are structured and connected.”
The report found that work pressures inside agencies have increased significantly, with 70% of professionals saying their jobs are more difficult today than they were two years ago.
More than half, or 54%, said client relationships have become more strained due to higher expectations, shorter timelines and increased scrutiny.
Operational inefficiencies remain a major challenge, with 44% citing inefficient processes and 40% pointing to siloed or disconnected systems. More than one-third of agencies now manage 10 or more tools, more than double the level reported two years ago.
The study also highlighted the rapid rise of AI adoption across the sector. Nearly 60% of agency professionals now use AI daily, compared with just 16% in 2024.
However, 90% said AI threatens their agency’s primary revenue streams, particularly as more clients bring work in-house and demand faster, lower-cost services.
The report also signalled declining workforce confidence. For the first time since Basis began tracking sentiment, fewer than half of respondents said they felt optimistic about the future of digital advertising.
Nearly 40% of agencies reported layoffs in the past year.
Basis said agencies that are best positioned to succeed will need to streamline operations, consolidate fragmented technology systems, rethink revenue models and invest in AI-ready infrastructure focused on efficiency, transparency and measurable outcomes.
