Your pricing model is built on deliverables. AI just 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 is not where agencies want to be.
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 just delays the reckoning. Clients will eventually ask why they are 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 cannot do today is a bet that it will not 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. That is the work we do in the Workshop.
$15,000
Fixed fee. Two days. 2–3 offerings ready to test with real buyers.
30 minutes with Shawn Yeager. No pitch.