Your pricing model is built on deliverables. AI made the deliverables nearly free to produce.
What’s happening
S4 Capital, parent of Monks and one of the most prominent AI-forward agency groups, reported net revenue down 12.7% in the first half of 2025. Headcount was cut 8.9%. Tech Services revenue fell 36.9%. Their CEO said it directly: “AI is eating the agency business.” This is not a struggling firm making excuses. This is an agency that invested heavily in AI and still watched revenue decline.
The math is straightforward. A blog post that used to take four hours now takes 30 minutes. A social media content calendar that took a day takes an hour. A first-draft design that required a designer can be generated in minutes. When your pricing is based on the time and effort to produce deliverables, and AI collapses that time and effort, your invoices shrink.
The agencies trying to compensate by producing more volume are accelerating the problem. More output at lower cost per unit is a commodity business, and commodity businesses compete on price. That’s not where agencies want to be.
The collapse is loudest in the work that used to anchor a proposal. In agency forums this year, owners comparing what they can charge for a website build describe prices that would have been unthinkable two years ago, because the client knows a competent site can now be generated in an afternoon. When the flagship deliverable reprices this fast, every retainer built on top of it inherits the doubt. The client who watched a site drop in price wonders what else on the invoice became cheaper to make.
Why the obvious responses don’t work
“Produce more deliverables to maintain revenue”
The volume play is a race to zero. If AI makes each deliverable cheaper to produce, producing more of them only delays the reckoning. Clients will eventually ask why they’re paying for volume when AI can generate volume for free.
“Add AI surcharges”
Clients see AI as reducing your costs, not increasing them. Charging more for something that costs you less to produce is a conversation no agency wants to have.
“Pivot to video and formats AI can’t do yet”
Temporary moat. AI video generation is advancing rapidly. Building your business model around what AI can’t do today is a bet that it won’t catch up tomorrow. It will.
What’s working instead
S4 Capital’s own agency group, Monks, is testing the alternative: output-driven pricing decoupled from headcount. Their Monks.Flow platform claims to produce assets 120x faster, and the agency cut 9% of its workforce while maintaining margin guidance. PMG, a performance agency that grew revenue 38% in 2024, has never sold hours. Founder George Popstefanov says “I’m not selling you hours. We’ve always been based on growth and outcomes and service strategy.” The agencies surviving the pricing collapse are the ones that charge for what the deliverables produce, not what they cost to make.
The pattern is the same across every firm that gets this right: they stop optimizing the old model and build new offerings around what AI cannot do. The Workshop is the facilitated day we do this work with you. You leave with 2–3 offering briefs, specified and priced. Your team tests them with named clients, then builds what earns it.
Offerings that address this
Other pressures on Marketing Agencies
The same pressure in other industries
Related reading
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AI companies spent a decade pricing human work: commodity rates for execution, billions for judgment. Your hourly invoice charges for both at the same rate.
$15,000
Two days from start to delivery, one on site with your senior team, then 2–3 offering briefs, specified and priced.
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