#BizTrends2025: ACA’s Gillian Rightford - Navigating the smile curve; reinventing agency value in 2025

Gillian Rightford, executive director, Association for Communication and Advertising, examines how agencies will look in the future, will add more value and charge appropriately - and have more fun (Image supplied)

What’s happening? AI is eating our lunch. Or is AI making our lunch quicker (and cheaper)? There is absolutely no doubt that at the speed with which these LLM’s are learning and adapting, they offer the industry both a threat and an opportunity.

They are a threat to the high-volume, low-quality work that eats up agencies time sheets and inspiration, which might in fact, be a blessing.

Back in 2018 (the before-times), Tim Williams of The Ignition Group, wrote about the Smile Curve developed by Stan Shih.

He explained it as follows: “The tips of the smile represent the work that carries the highest value. The perceived value dips in the trough of the smile."

Using the work of an advertising agency as an example, this model could be visualized as follows:

Source: LinkedIn

The real insight of Tim’s article was that agencies turned the “smile into a frown”, by giving away the high-value work on start of the process in the form of pitches, and dramatically underprice (undervalue) the back-end of the curve by applying, what Tim calls the “badly flawed ’blended hourly rate which only serves to assign an average value to every point on the curve”.

Givinge away high-value work to get the low-value work

The result is that agencies give away the high-value work to get the low-value work.

As he writes: “Not a brilliant business strategy. Because the services in the dip of the curve must be done at low cost, it’s almost always low-margin work for agencies. To make matters worse, low-value work constitutes up to 80 percent of the volume of many firms. It’s no wonder agency profits have been on a steady 25-year decline.”

He correctly predicted that most marketers will eventually take most of this work in-house, a trend dramatically sped up by AI allowing the creation and execution of high-volume creative assets and media buying at scale.

And in a way that’s the blessing I hope for.; that agencies will apply their best talent to the tips of the smile, charge for them correctly and protect their IP.

From mass towards niche communities

The other curse/blessing I see is the rapid dismantling of the social media eco-system as we’ve known it.

The changes at Twitter/X, and now at Facebook, are causing people to evaluate whether they want to stay on those platforms and look for alternative spaces.

As has also been predicted by others (Zoe Scaman among them) people are moving away from mass towards niche communities.

This is going to mean that the scale of execution at which AI excels, may in fact cease to be so important.

Consumers will start moving away from clearly artificial content to more real, human content.

Make a spectacle out of it

A brilliant article in the The Guardian summed up 2024 as the year we just gave up being “perfect” and article examines music, movies and culture and declares, “The message is: It’s OK to be a bit messy, physically and mentally, and let’s have a good time while we’re at it".

Brand strategy consultant Eugene Healey is quoted in the article with a message for agencies that is also an enticing one and one that works at the tips of the smile.

“Successful advertising these days is chaotic and entertaining," he says.

In a TikTok post, he said: “If brands are still going to sell me something I don’t need, at least make a spectacle out of it.”

Long gone are the days of earnest and minimal millennial advertising such as Airbnb promising us we could “Belong Anywhere”.”

Prediction: Agencies will look different in the future but will be able to add more value and charge appropriately for it. And have more fun.
#FingersCrossed