We sat down with Arthur Perez, managing director and head of strategy at London-based global creative agency Stereo Creative, to discuss how AI is impacting ad agencies. Perez expands on the biggest challenges, how they are using AI to their advantage, and what goes into creating culturally relevant content. 

AI has turned the entire advertising landscape on its head, and ad agencies are well acquainted with many of the challenges. 

Reflecting on the situation, Arthur Perez, managing director of Stereo Creative agency, referenced a frog sitting in a pot of water as it’s brought to a boil. 

A shift in value 

According to Perez, the biggest threat to agencies is their shifting value: the value of agencies is being eaten up slowly. Agency fees have decreased significantly over the last few decades, with the rise of AI as well as more brands turning to in-house teams to carry out their creative operations.

The threat of AI is exponential. Out of their three areas of service – branding, campaigns, and production at scale – the latter has been the most affected by AI. 

The challenge of brands taking their creative processes in-house isn’t new, but it’s also growing. 

An increasing number of brands are refusing to pay agency fees for work that they could produce internally. 

Stereo Creative, like many other agencies, is in the process of modifying its remuneration model in response to the landscape’s evolution. Agencies traditionally operated on a remuneration system based around billable hours, but with AI, everything is changing. Something that could have taken a week may now take just a couple of hours. 

Stereo Creative’s US team is already working on a value based system. Their UK team is now working towards incorporating something similar. Perez described the "shift in how the value will be monetised", with value being moved upwards, further away from pure production. The value of always-on campaigns is also an element that needs to be accounted for. 

Assessing the challenges from a wider perspective, Perez believes that media agencies are in the most danger. Their offerings are more reliant on historical data, making AI suggestions more accurate and predictable.  

Championing human creativity  

While confronting the challenges brought about by AI, Stereo Creative is harnessing the technology to help take on administrative tasks. The team is toying with agentic AI, incorporating it into its operational layer. Perez explains that for one client alone, the team can deal with approximately 600 briefs per month, which means producing up to about 1,000 assets per month. 

As a creative agency, they don’t allow AI to come in contact with creative. "We are firmly not impacting creative," Perez assured.  

The rise of AI has come in direct competition with creativity. AI is about the average, the expected.  

"The creative process is inherently focused on hurdles, chaos, conversations," Perez expanded. He believes that to get people genuinely interested and inspired, you need some chaos. "When you pass down a statistical model which gives us often a mean average, you don’t have these chaotic moments."

Lived experience is what gives humans the upper hand when it comes to creativity: AI will never have this. "I’m defending craft, I'm defending human judgement, I’m defending bespoke, agile, and exciting work," Perez stated. 

When it comes to ensuring content is culturally relevant, the key is working with people who have lived experience. Perez adds that often, they will pair an expert with someone who has little knowledge of the topic for a particular campaign.

This clash of understanding can be beneficial: someone less familiar with a topic is able to question certain decisions with the perspective of an outsider. The agency also partners with external individuals who have lived experience in specific areas of interest. 

The value of investing in creativity 

With many brands worried about their reputation, being risk-averse is common. Many are satisfied with predictable creative. Yet, creativity itself should not be viewed as a risk. "Good enough is everywhere, therefore, there’s true value in creating something that is exciting." With AI, good enough is now easy to achieve. 

Perez believes creative agencies need to reframe the concept of creativity so that brands understand its value. If they don’t, the real risk is churning out tepid, unmemorable content and being forgotten.

Executing an exciting, inspiring, and culturally relevant ad campaign is rarely achieved by simply doing what’s expected.