Beyond Billable: Debating The Glacial Movement of Agency Payment Models

WPP CEO Cindy Rose spent her first day of Cannes Lions attempting to reset the conversation around agency models when she decried the prospect of continuing to charge based on time. Instead she  outlined her own new framework based around five ‘trust principles’ with commitments based on data, AI, and accountability. 

She stated her belief that the traditional agency billing model of time and materials was “dead”, adding: “This idea that we have to produce a staff plan with a number of humans and their hourly rates, in the world of AI… that’s just not a model that’s sustainable.”

Her provocation lands in an industry that has spent years debating new agency commercial models without ever meaningfully moving beyond timesheets. Advertising today looks nothing like it did a decade ago, yet agencies continue to charge in a way that fails to reflect how work is actually made. With AI reshaping workflows, procurement tightening its grip, and client budgets under pressure, the need for change feels unavoidable — but will agencies act?

Last summer’s IPA study, The Price Isn’t Right, laid out exactly why current pricing is no longer fit for purpose and proposed a roadmap towards value-based models. A year on, signs of real movement remain scarce.

This question of agency remuneration was front and centre at a session hosted by MSQ in Cannes, where its executive director Kate Howe, Booking.com’s Stephanie Frank and procurement specialist Tina Fegent explored why progress remains so slow — and what it will take to finally shift the model.

A varied approach

While Howe agrees that time-based billing no longer works for agencies or clients, she sees the sticking point being that neither side has yet to find a better alternative. The industry was built on the existing remuneration model and it’s one that clients know how to buy and benchmark. While there is currently no single replacement, there are alternative models worth exploring, she adds, stating that each client deserves a pricing approach tailored to what they actually need.

From a marketer perspective Frank says the timesheet model is frustrating for clients because it forces marketing teams to act like auditors, scrutinising hours rather than focusing on marketing. It creates friction with procurement and exposes how little internal alignment there often is. She adds that clients also need to upskill to understand alternative models, but legacy systems and hesitancy to change keep companies stuck.

“Sometimes there is maybe an opinion or a thought that on the client side we all agree internally, but we quite wildly disagree with procurement on various things quite often,” she reveals. “From a marketing perspective it certainly is quite challenging.”

Frank also goes on to say that, in her experience, costing through time has rarely reflected either quality or value of the outcome. 

Fegent focuses her ire towards the WPP boss issuing her own response to Rose’s proclamation around the demise of traditional billing models, adding that she questioned her personally after the statement as she believes it still produces accountability for both sides. She felt the response she received was “vague”. She did however concede that she agreed with Rose on her rationale based on efficiency and effectiveness but that she is only speaking to brand CEOs rather than their CMO and CFOs about what they want. 

According to Fegent, the industry suffers from a lack of education about alternative remuneration options, while she also believes AI is finally forcing long-avoided conversations about changing how agencies get paid.

But in theory reducing payment based on hours also means the agency is being paid less too, but AI’s ability to reduce the manpower and time needed has already become a reality. It is also a major technological investment, Howe adds. 

She believes that alternative models such as technology-access fees, licensing arrangements, and agent-building, are emerging methods through which agencies can charge. She also underlines the need for agencies to recover these investment costs to be able to keep tools updated or train the next generation of talent. 

“It's critically important that the conversations that agencies are having with brands encompasses the cost of access to the technology in one guise or another. And there's lots of different ways you can do it, because otherwise it's a different type of race to the bottom, and we can't afford to go there,” states Howe. 

Frank adds that from her perspective she has still yet to see huge savings via AI adoption in terms of time or budget. 

Alternative models

Emerging models are out there and MSQ is actively exploring them, shares Howe. One example is of a client whose content demands far exceeded the agreed scope, which left one of their agencies losing money. As a solution, rather than asking for a large budget increase, they proposed using its new AI platform and training it on the client’s brand and assets to deliver the required volume efficiently. 

She admits that the client did still pay a small additional fee plus a technology licence, allowing their in-house team to use the tool. 

“That's where you have to be really thoughtful about the problem that you and your client are sharing, and if they want certain quantity or volume of output for a certain budget, you need to think through how technology can play into that, and then what makes sense for all parties to make sure that you can deliver what's needed,” she outlines. 

This illustrates how AI can enable sustainable pricing solutions tailored to each client’s needs, rather than simply offering “more for less”.

The discussion also reveals that while there is a sense that marketers want to see a change the panel felt that in reality, behind closed doors, this is not the case. 

The speed of change has also meant that across the MSQ Group varying payment models have been applied to avoid a reliance on just one, which may no longer be fit for purpose in a short space of time either. 

Howe also discusses a project with a CPG client that saw one of the agencies produce imagery for a product launch utilising AI that saved them spend on photography and retouching – this time allowing them to choose the platform used, as MSQ remains tech agnostic. 

“Because we made it work, it worked for us at a price we felt comfortable with. They got it much faster at a much lower price than they would normally do while we've picked up four more briefs to do similar things for them, so it's scaling for us,” she continues. 

Frank does warn that there is a risk that clients start to believe they can do everything themselves inhouse, adopting the same technology and processes, to further cost save. 

And the lack of movement by clients to adopt new payment models, Fegent says, is simply because it is not a priority for them. She cites moves to measure sustainability and diversity as other areas that marketers have begun to focus more on in recent years, as well as transformation, which has become key for brands. 

Meanwhile, they must also prioritise organising their data in order to optimise consumer relationships, Howe adds. Marketers have a lot on their plates and change to legacy payment processes may seem unnecessary in some cases as they may feel are not yet fully broken, even if other departments disagree. 

Another age-old suggestion for an alternative remuneration model is one based on outcomes and incentives. Fegent believes that idea falls down in reality due to a lack of aligned KPIs between clients, procurement, and agencies. 

She says that without shared objectives or clear ways to measure success, it’s impossible to build accountable value-based arrangements. She also says that good procurement teams welcome measurable KPIs, and that agencies need to prove what they can track, while clients must define what they’re actually being judged on — otherwise every model falls apart.

Despite various ideas and suggestions, the debate on payment system for agencies still looks set to run and run for some time yet. But as many of its major businesses see their value steady decline, a line in the sand inevitably needs to be drawn sometime. Doesn’t it?