In an industry defined by innovation and adaptation, the business of creativity is undergoing perhaps its most significant transformation yet. As we navigate through 2025, creative agencies in advertising, marketing, and communications are reimagining their fundamental structures, processes, and value propositions. This isn't merely an evolution—it's a complete reimagining of what it means to be a creative business in the digital age.
The forces driving this change are multifaceted: economic pressures, technological revolutions, shifting client expectations, and the ongoing quest to balance efficiency with creative excellence. For agency leaders and marketing professionals alike, understanding these shifts isn't just academically interesting—it's existentially necessary.
This article examines how the business of creativity is changing, what innovative agencies are doing to adapt, and what these transformations mean for the future of creative work. Drawing from industry research, expert insights, and real-world case studies from across Europe and beyond, we'll explore the new models emerging in this rapidly evolving landscape.
The Shifting Economic Landscape for Creative Agencies
The creative industry in 2025 operates against a backdrop of economic uncertainty that has fundamentally altered client-agency dynamics. "Broadly, I'd say things feel uncertain," notes Charlie Bowden, creative director at KesselsKramer, speaking for many when describing the current climate. "This is both my feeling and the sense I get speaking to friends across various creative fields."
This uncertainty manifests most visibly in client budgets. While global advertising spend is expected to climb to $1.1 trillion in 2025 according to Creative Salon's research, the distribution of this spending has changed dramatically. Agencies report that clients are increasingly cautious with their investments, demanding more deliverables for the same or reduced budgets.
Karl Doran, founder and creative director at Flow, illustrates this challenge starkly:
"The first quarter of this year has been the worst I've seen in nine years of running a studio. We've pitched for nearly £800k worth of projects, and only won about £60k, with around £150k still pending."
The economic pressures extend beyond simple budget constraints. Many of the world's largest companies have moved to 90-day payment terms, creating significant cash flow challenges for agencies, particularly smaller ones. As Ryan Stone of Lambda Films explains:
"As an SMB, we often have to prop up projects and costs from our own pocket."
In Europe specifically, the market presents a complex picture. The German SaaS market, for instance, valued at €6.85 billion in 2020, is projected to nearly triple to €16.3 billion by 2025, indicating significant growth potential in specialized sectors. Meanwhile, UK marketing spend is expected to reach a record high of £40 billion—double that of Germany—despite economic headwinds.
This economic landscape has accelerated a bifurcation in the agency world. Alex Dixon, founder of DACRE, observes:
"I'm seeing some larger brands move from small rosters of large agencies to large rosters of more niche agencies. So I feel in the agency world, the big will continue to get bigger. There'll be more mergers to keep up and retain larger billing clients, halving operating costs through lower headcounts and reduction in office space."
The $13 billion merger of Omnicom and Interpublic Group exemplifies this consolidation trend at the top end of the market. Meanwhile, a new generation of specialized boutiques is emerging to serve specific niches, leaving mid-sized agencies increasingly squeezed between these two extremes.
AI Integration: From Threat to Strategic Advantage
Perhaps no force is reshaping creative businesses more profoundly than artificial intelligence. In 2025, AI has moved beyond experimental applications to become a central component of agency operations and service offerings.
According to research from the World Federation of Advertisers (WFA), three-quarters of advertisers plan to change their compensation models over the coming three years, with alarmingly over half (58%) planning fee reductions directly connected to the deployment of AI. This represents both a threat and an opportunity for creative agencies.
The anxiety is palpable across the industry. Chris Joyce, founder of VelvetBadger, captures the sentiment:
"AI continues to split the room: clients tend to either love it or hate it. We're not seeing it replace design jobs just yet, but you can definitely sense the anxiety."
Yet alongside this anxiety runs a current of optimism about AI's potential to enhance rather than replace human creativity. Becky Verano, vice president of marketing at Reckitt, envisions
"GenAI enabling all brands to embrace 'true' full-funnel communications. We will be able to move away from the standardised 'matching luggage', to more complicated and intricate content, that amplifies the creative ideas that appeal to our consumers on different platforms."
European agencies are taking varied approaches to AI integration. DEPT, a leading digital agency with offices across Europe, has pioneered what they call "AI-assisted storytelling," combining human creative direction with AI-powered content generation and personalization.
Mintel Consulting has christened this trend the "Personalisation Renaissance," predicting that "fuelled by consumer expectation, even more brand communications and messaging will be tailored direct to individual users as they increase their understanding of consumer needs." The consultancy believes that the ability to actionably leverage data to improve customer experiences will deliver key competitive advantages, with AI tools enabling that vision.
McKinsey research confirms that companies investing in their digital and AI capabilities are currently outperforming peers across various industries, including advertising. This performance gap is likely to widen as AI adoption accelerates.
For smaller agencies, AI offers the potential to compete with larger rivals by automating routine tasks and enhancing productivity. As Gordon Reid, founder of Middle Boop Studio, notes: "While there's a lot of fear about AI and automation, the other side to the coin for me is that creative bravery stands out more. Upskilling and evolving your offerings are more important than ever; hyper-niching will put you above the rest."
Evolving Agency Structures and Business Models
The traditional agency business model is undergoing a fundamental reimagining in 2025, with new structures emerging to meet changing market demands.
Slam Media Lab exemplifies this evolution with their hybrid approach.
"At Slam Media Lab, our agency model enables us to tackle diverse, high-impact projects while consistently delivering exceptional results for mission-driven clients," they explain in their case study. Their model combines project-based fees, retainers, and performance-based incentives tailored to each client's needs.
This flexibility extends to organizational structure as well. "Building a thriving agency in 2025 requires balancing an efficient internal structure with a client-focused external framework," Slam Media Lab advises. Their approach includes transparent client communication, a unique value proposition focused on specialized services, and agile workflows leveraging tools like Notion for project management and Slack for real-time communication.
Remote and hybrid work models have become standard for agencies of all sizes, offering agility, access to global talent, and cost efficiency. This shift has enabled even small agencies to compete globally by maintaining a core in-house team while outsourcing specialized roles.
The project vs. retainer debate continues to evolve as well. While retainers have traditionally provided stability, many agencies are now adopting value-based pricing models that tie compensation to measurable outcomes rather than time spent. As the Slam Media Lab case study notes:
"Our expertise in no-code Webflow development, organic SEO, branding, and content marketing enables us to deliver results efficiently. By specializing in these core areas, we help clients maximize impact while optimizing resources."
In Europe, we're seeing distinctive approaches to agency structure. Advance B2B in Helsinki, Finland, has developed a performance-driven model specializing in helping B2B tech companies overcome growth challenges through integrated branding, marketing strategy, and technology implementation. Meanwhile, London-based agencies like Hey Digital, MADX, and Kurve have developed specialized models focused on performance marketing, SEO-driven strategies, and scalable growth engines respectively.
The mid-market squeeze is driving further innovation in business models. As Alex Dixon of DACRE observes:
"Mid-sized agencies will really get squeezed. They can't undercut the up-and-coming indies and can't handle large retained global accounts with huge service offerings like the big dogs. So I feel the gap between big and small will only get bigger and bigger." This pressure is forcing mid-sized agencies to either specialize more deeply or expand their service offerings to remain competitive.
Client-Agency Relationship Transformation
Perhaps no aspect of the creative business has changed more dramatically than the fundamental relationship between agencies and their clients. The traditional client-service provider dynamic is evolving into something more complex and, at times, more challenging.
One of the most striking developments is what Ryan Stone of Lambda Films calls the "ghosting" phenomenon:
"We've always measured the results of our enquiries in terms of wins and losses. However, last year, we had to add a new category, 'Ghosted'. Being ghosted remains the highest 'result' from all our pitching."
This reflects a broader shift in how clients engage with agencies. Decision-making cycles have extended dramatically, with Ryan noting:
"We now measure project award decisions in months rather than days or weeks. In some cases, we pitched for projects over eight months ago, and they're still being considered."
Budget transparency has become another flashpoint. Karl Doran of Flow highlights a common frustration:
"The annoying thing is that in many of these cases, no budget has been shared up front, despite us always asking. If there had been more transparency earlier on, it would have saved us a lot of time putting proposals for jobs that we're not going to win anyway."
These challenges are driving agencies to rethink their approach to client relationships. Slam Media Lab emphasizes transparent client communication as a cornerstone of their model:
"We establish clear expectations from the outset by conducting in-depth discovery sessions, crafting customized proposals, and providing detailed contracts. Regular updates and performance reports keep clients informed at every step."
Value-based pricing is gaining traction as agencies seek to align their compensation more directly with client outcomes. This approach shifts the focus from hours worked to results achieved, potentially creating more equitable partnerships. As Slam Media Lab demonstrates in their case study, this approach can drive significant results:
"For nonprofits, we've turned organic search into their leading marketing channel, increasing website traffic by over 200% in less than a year."
European agencies are pioneering innovative approaches to client relationships. M+C Saatchi's work with Iceland ("Looks Like You Need Iceland") and Mother London's campaign for KFC ("Believe in Chicken") represent case studies in deep client collaboration that transcends traditional agency-client boundaries. These partnerships involve agencies taking on more strategic roles, helping to shape business objectives rather than simply executing against briefs.
The shift from service provider to strategic partner represents perhaps the most significant evolution in client-agency dynamics. As Nicki Field, joint MD at Jelly/TBM Group, observes:
"As an industry, we're being batted about by constantly changing economic and geopolitical events, making clients at the top of the spending pile risk-averse, both in taking creative risks and budgeting. However, there's a lot more bite back in the industry in 2025. I think collectively there's a joint feeling that if we don't fight the blandification of 2024, it's all just a race to the bottom."
The Human Element: Talent and Creativity in the Tech Age
Despite the technological transformation sweeping through creative businesses, the human element remains central to agency success in 2025. However, the relationship between talent and agencies is evolving in response to changing market conditions.
Recruitment has become an increasing challenge across the industry. "The knock-on effect of client budgets is that agencies have less room to hire and promote staff, and that's hard for both employee and employer," notes Charlie Bowden of KesselsKramer. "2024 saw countless redundancies and hiring freezes. I get the sense this is changing slightly, but it's still tough out there."
The skills required of creative professionals are also evolving rapidly. According to research from the Digital Marketing Institute, 70% of marketers say their employers don't provide generative AI training, despite 36% feeling their teams lack relevant AI skills. This creates a significant skills gap that agencies must address to remain competitive.
Yet alongside these challenges, we're seeing a renewed appreciation for distinctly human creative capabilities. Ashley Matthews, creative director at TMG, observes: "We're seeing AI come in and deliver 'fine' work at scale, and that's a constant threat to be aware of. But we also see it as a chance to get inspired and back in love with doing the work. We've got to get on with it, get into it, and get in love with the making of it all."
This sentiment is echoed by James W., who drives video-first advertising campaigns for global brands: "There's a real appetite right now for storytelling and longer-form, narrative content. Clients seem more ready to invest in that space, maybe as a human counterbalance to the way AI is shaking things up?"
European agencies are at the forefront of this human-centered approach. DDB Paris's work with Glenmorangie ("It's Kind of Delicious and Wonderful") exemplifies how emotional storytelling remains a powerful tool that AI cannot easily replicate. Similarly, adam&eve, DDB's campaign for CALM ("The Last Photo") demonstrates how human insight and empathy can create profound connections with audiences.
The democratization of creative tools through AI and no-code platforms is also changing who can participate in creative work. Smaller agencies and independent creators now have access to capabilities that were once the exclusive domain of large agencies with substantial resources. This is creating new opportunities for specialized boutiques to compete effectively in niches previously dominated by larger players.
As Gordon Reid of Middle Boop Studio notes, this democratization makes creative bravery and distinctive vision more important than ever: "Upskilling and evolving your offerings are more important than ever; hyper-niching will put you above the rest."
Future Outlook: Where the Business of Creativity is Heading
As we look beyond 2025, several trends are likely to shape the continued evolution of creative businesses.
The consolidation at the top end of the market will likely accelerate, with more mergers like the Omnicom-Interpublic Group deal creating ever-larger agency holding companies. These entities will increasingly position themselves as end-to-end partners for global brands, integrating creative, media, data, and technology capabilities.
Simultaneously, we'll see continued proliferation of specialized boutiques serving specific niches or offering particular expertise. The "mid-sized squeeze" identified by industry leaders will intensify, forcing agencies in this category to either scale up through mergers and acquisitions or focus more narrowly on specialized offerings.
AI integration will move beyond its current applications to reshape creative processes more fundamentally. As Becky Verano of Reckitt envisions, we'll see more sophisticated applications that amplify rather than replace human creativity:
"We will be able to move away from the standardised 'matching luggage', to more complicated and intricate content, that amplifies the creative ideas that appeal to our consumers on different platforms."
Client expectations will continue to evolve, with increasing emphasis on measurable outcomes and ROI. Value-based pricing models will become more sophisticated and widespread as agencies and clients seek more equitable ways to structure their relationships. The "ghosting" phenomenon may diminish as more formalized processes for agency selection and engagement emerge.
In Europe specifically, we're likely to see continued growth in specialized sectors like SaaS marketing, with agencies developing deep expertise in particular industries or technologies. The projected growth of the German SaaS market to €16.3 billion by 2025 indicates the scale of opportunity in just one segment of the European market.
The talent landscape will continue to evolve as well. Remote and distributed work models will become even more sophisticated, enabling agencies to access global talent pools while maintaining cohesive cultures. Upskilling and continuous learning will become even more critical as technology continues to evolve rapidly.
Perhaps most importantly, we'll see continued innovation in business models as agencies experiment with new ways to create and capture value. The hybrid approaches pioneered by agencies like Slam Media Lab, combining project-based fees, retainers, and performance incentives, will likely become more common and more sophisticated.
As Ashley Matthews of TMG suggests, the most successful agencies will be those that embrace change while staying true to the fundamental creative impulse:
"We've got to get on with it, get into it, and get in love with the making of it all."
The rundown
The business of creativity in 2025 is characterized by paradox: economic pressure alongside unprecedented opportunity, technological disruption alongside renewed appreciation for human creativity, consolidation at the top alongside proliferation of specialized boutiques.
Navigating these paradoxes requires a willingness to reimagine fundamental aspects of how creative businesses operate. The agencies that are thriving are those that have embraced change—in their structures, their processes, their client relationships, and their value propositions.
For creative professionals and business leaders alike, this period of transformation offers both challenges and opportunities. The skills, mindsets, and business models that drove success in the past may not be sufficient for the future. Yet the fundamental value of creativity—the ability to solve problems, tell stories, and create meaningful connections—remains as important as ever.
As Nicki Field of Jelly/TBM Group puts it: "I think collectively there's a joint feeling that if we don't fight the blandification of 2024, it's all just a race to the bottom." In this sentiment lies perhaps the most important insight for creative businesses navigating change: that amid all the technological and economic disruption, the pursuit of distinctive, meaningful creative work remains the industry's north star.
The business of creativity is changing, but creativity itself—human, messy, unpredictable, and transformative—remains at its heart.
References
1. Creative Boom. (2025, April 22). State of the Industry 2025: how are creative agencies faring?
2. Creative Salon. (2025). Ad Agency Trends To Watch Out For in 2025.
3. Omnius. (2025, April 10). Best 15 Europe's SaaS Marketing Agencies In 2025.
4. Creativebrief. (2025, March). The Top 30 agency case studies.
5. Slam Media Lab. (2025). How to Structure Your Agency Business Model in 2025.
6. Digital Marketing Institute. (2025). 10 Eye-Opening AI Marketing Stats in 2025.