Creative Churn: Indian advertising agencies dread layoffs as AI upends industry globally

AI tools now enable clients to develop content, and they are outsourcing less and less work to advertising agencies. The industry is in turmoil, forcing two of the Big 5 advertising holding companies–Omnicom and Interpublic Group–to merge globally. That has triggered a wave of job cuts, and local agencies are also bracing for a shakeup.

“The Indian advertising market is going through a seismic shift. The creative work is now getting done by clients’ in-house teams. AI tools are used for creating advertisements across platforms as campaigns become hyper-personalised," said Rajesh Sethi, partner and leader Media, Entertainment and Sports, PwC India. “By leveraging AI, organisations are becoming more productive and efficient. However, this transformation may influence entry-level roles in the industry and gradually reshape the traditional business models of advertising agencies."

Digital advertising was already on the rise. Clients are now betting on it even more, given a large youth population, expanding broadband access, and deeper consumption of online content. A PwC report estimates Indian internet advertising to expand from ₹6.25 billion in 2024 to ₹13.06 billion in 2029.

Late last month, NYSE-listed Omnicom and Interpublic Group announced a $13 billion merger. With global revenues exceeding $25 billion, the combined post-merger Omnicom will become the world’s largest advertising network.

In India, London-based WPP remains the largest, comprising media agencies such as Ogilvy, Burson and GroupM, which was rebranded as WPP in May.

Still, the merger between Omnicom and Interpublic Group (IPG) has already killed several well-known agencies, including FCB, DDB, and MullenLowe. There will be 4,000 layoffs worldwide, Omnicom’s top management told the Financial Times last week. Executives Mint spoke to said the India offices will also be impacted.

Senior executives on radar

"The newer age, more adaptable agency networks like Publicis and Omnicom are better and more centrally run," one senior executive close to the Omnicom-IPG merger said, requesting anonymity. "IPG is more of a holding company of the past, where there is just one financial entity with many more entities in it, which do not need to be connected with each other. The new age model of networks functions more like Omnicom and Publicis does, where advertisers buy into these main brands and not into the brand name of one of the many agencies they own."

The senior executive pointed out that these agencies and business units have separate finance, admin, and other teams. “All of this adds up to cost to the client, all costs that the client does not really need to eat."

Much of those cost efficiencies will now come from layoffs and the removal of overlapping functions. While India is not a significant cost centre for these global networks, which lean heavily on the US and European markets, much of the cost efficiency here is likely to come from cutting duplicate C-suite roles, the executive said. As much as 40% of such senior executive roles could go in the next few months, although major layoffs have not started yet, the executive added.

IPG operates agency networks FCB, McCann, MullenLowe and IPG Mediabrands, while Omnicom runs two verticals—the Omnicom Media Group for media buying, planning and investment agencies; and the Omnicom Advertising Group for the group’s creative agencies.

A creative agency offers services such as creating ad films and building brand marketing campaigns, while a media buying agency buys and plans media inventory and where these ads can be placed.

Omnicom Advertising Group, Omnicom Media Group, and WPP India declined to respond to Mint’s queries.

‘Dread throughout’

The second-order effects of the global merger are being felt in other agency networks.

“We had a townhall in November assuring us that there will not be any layoffs, but there is dread throughout the agency," the vice president of one of the largest creative agencies in India said, requesting anonymity. “We are getting to know of colleagues who are put on a performance improvement plan (PIP), and they are worried the next stage is retrenchment."

An employee with low appraisal ratings is put on a PIP, and the process is ideally meant to help the employee improve performance, but it could also be a step toward getting laid off.

“Much of the agency cutting has happened in the creative services and not in media buying and planning," Naresh Gupta, founder of independent agency Bang In The Middle, said. “The networks today are not interested in buying a pure creative service agency. You need to build a media practice, or you will get acquired if you run something like an influencer agency."

Doubt and unrest

Multinational advertising firm Publicis Groupe said it is upskilling teams and building hybrid roles.

“The industry is undergoing a period of global transformation led by AI, shifting client priorities and consolidation, and for us this has meant being intentional with talent—prioritising future-facing roles across data, tech, AI, commerce, media and integrated strategy," said Publicis Groupe India spokesperson in an emailed response to queries. The firm noted that its AI-led capabilities will “augment" and not “replace" talent.

A 40-year-old senior executive from Mumbai got retrenched last month from an advertising tech firm, and AI-driven creatives were one of the primary reasons. “For the past one year, the clients came up with their own creatives through AI prompts and the team just could not keep up," said the executive, who was given two months of severance pay. “Some of the firms are recruiting freelancers for client servicing, which until now was the work of the core teams in the agencies."

A senior HR executive at one of the leading agency holding companies said things are not so “bad with us yet, but increments are impacted".

“Everyone is waiting and watching how things will turn out with this big merger—leadership changes, how businesses and P&Ls will be impacted for everyone in the business in terms of market share," the executive said. “The same goes for talent–everyone is anticipating heavy layoffs in the merger. In general, there is unrest."