Only 17 per cent of multinational advertisers now pay agencies for time, down from 54 per cent in 2011. Fixed fees lead, performance deals have doubled, and almost nobody has priced in AI.
Big brands have almost stopped paying their agencies by the hour. Only 17 per cent of multinational advertisers now use labour-based fees, down from 54 per cent in 2011, according to a study published on Monday by the World Federation of Advertisers with the consultancy Agency Mania Solutions. The research covers 69 multinationals across six industries with a combined marketing spend of $147bn.
Fixed fees and output-based deals, where the client pays for what is made rather than the time spent making it, are now the most common model at 35 per cent, up from 20 per cent in 2011. Labour-plus-performance deals, a base fee with a bonus tied to results, have more than doubled from 9 to 23 per cent. Labour-based fees had already fallen to 33 per cent by 2022 before halving again, as Marketing-Interactive reported.
The picture varies by region. In Asia Pacific 44 per cent of brands use fixed-fee or output models, against 32 per cent in Europe. The US and Canada remain the stronghold of the hourly rate, which is still the most common model there at 38 per cent.
More brands say they want to pay for results, with 58 per cent expecting to use more performance-based fees and 43 per cent more value-based models. But the bonus is rarely the main event. Across most disciplines, between 64 and 80 per cent of respondents said performance pay makes up less than a fifth of what their agencies earn.
AI is the change nobody has priced yet. Only 20 per cent of brands have changed their commercial models to account for it, while 61 per cent say they intend to. And while 89 per cent say they get value for money, only 45 per cent say they can see enough of how their agencies’ costs and profits are made up.
The billable hour was always an odd way to buy ideas, because it rewards agencies for taking longer. The shift to paying for outputs was well under way before AI, but AI finishes the argument: if a tool can produce in minutes what used to take a team a week, nobody can sensibly bill the week. The agencies that cope best will be the ones that already sell outcomes rather than time.
The survey’s most telling number is not about money at all. Asked what makes a good agency relationship, brands scored a great briefing at 5.6 out of 6 and financial incentives at 3.9. The fee model matters less than the brief. For how agencies are structured and who owns them, see our guide to the holding companies and media versus creative agencies.
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