A new report by the World Federation of Advertisers and Agency Mania Solutions reveals that the use of labour-based models has fallen dramatically over the last 15 years dropping from 54% in 2011 to 17% today, with a significant drop from 33% in 2022 when the research was last carried out. Over the last decade and a half, fixed-fee/output models have risen from 20% to 35% and labour-plus-performance models have more than doubled, from 9% to 23%.
Performance-based fees show the strongest momentum, with 58% expecting increased use, followed by value-based models at 43% and fixed-fee or output-based approaches at 36%. By contrast, 42% anticipate further reducing labour-plus-performance arrangements, while commission models also face more contraction than growth.
How Brands Define, Scope and Reward Agency Work also predicts that AI will accelerate this process, given that the technology allows agencies to do more, faster. Brands, however, are still catching up, with only 20% already evolving their commercial models in response to AI, although 61% intend to.
The findings are based on responses of 69 different multinational companies, representing 6 different industry sectors and a collective global marketing spend of $147 billion. Most (71%) respondents were in a global marketing procurement role.
“Clients ultimately care about the quality, impact and performance of the work – not how many people or hours were required to produce it. AI is accelerating this transition by enabling agencies to complete many activities faster, making time an increasingly weak proxy for value,” says Laura Forcetti, Director of Global Marketing, Sourcing and Director Marketing Services, Asia Pacific at WFA. “The growth of hybrid approaches also shows that no single model suits every discipline or assignment. The future of agency compensation is not paying for effort, it is rewarding valuable work, delivered effectively.”
