AI hits advertising as WPP plans £500m of annual cost cuts

TL;DR:

• WPP plans to cut £500 million in annual costs by 2028 and sell non-core businesses; Omnicom has taken over IPG and is cutting thousands of jobs in the combined business.
• Publicis shares are down 11% year-to-date despite operational outperformance, hit by industry-wide concern that AI rivals will do more of the work cheaper.
• For UK readers, the FT data point most worth noting: more than two-thirds of UK media spend now goes directly to tech platforms, bypassing media agencies entirely.

The traditional advertising agency model is being restructured around AI, with WPP planning £500 million in annual cost cuts by 2028 and Omnicom cutting thousands of jobs after taking over IPG, according to a Financial Times report on the future of marketing. Publicis chief executive Arthur Sadoun told the FT: “We have seen more disruption in the last 12 months than we have seen in the last 12 years.”

The mechanism is straightforward. Generative AI replicates large chunks of agency creative output in minutes at a fraction of the historical cost, while clients increasingly take that work in-house. Media analyst Ian Whittaker summarised the resulting commercial bind: “Agencies are still largely structured — and priced — around activity. Clients are increasingly focused on returns. That gap is going to become harder to sustain.”

The UK numbers worth flagging

Two figures from the piece anchor the UK story. Jessica Tamsedge, chief executive of Dentsu Creative UK & Ireland, told the FT that more than two-thirds of UK media spend is now directed to tech platforms, bypassing media agencies. She added that AI led to nearly a 15% headcount reduction at creative agencies last year, “threatening the industry’s time and materials commercial model”. WPP boss Cindy Rose framed AI as “a crucial amplifier” while pushing AI investment as a structural response.

Publicis shares are down 11% year-to-date despite the company outperforming peers operationally — investors are pricing in the risk that AI rivals do more of the work cheaper. All large agencies are simultaneously investing in their own AI tools while watching those tools threaten parts of their own business — what one executive described as a “dangerous game”.

This story sits alongside the World AI Film Festival debut at Cannes, which ran 5,000 AI-generated submissions through public competition. Both signal that the Hollywood-Madison-Avenue argument over AI economics has stopped being theoretical and started showing up in earnings, restructuring announcements and live cultural debate over copyright.

Looking forward

For UK marketing leaders, the FT piece is essentially a warning about how billable structures will change. Mark Read, who stepped down as WPP CEO last year, said the big creative idea is still important “but it’s not where agencies make the money any more”. The procurement implication is that UK clients renewing agency contracts in 2026 should expect — and be willing to ask for — outcome-priced engagements rather than time-and-materials. The agencies that survive will be the ones that get there fastest. Arthur Sadoun’s “more disruption in 12 months than 12 years” line is unusually candid coming from a CEO whose share price depends on the opposite reading.