Advertising agencies are shifting from labor-based billing to opaque tech fees and programmatic markups as AI reduces the need for manual labor. This transition complicates transparency for advertisers, particularly in the programmatic CTV space where measurement gaps and rising fraud rates persist.
The transition from hourly billing to outcome-based models is driving agencies toward proprietary tech platforms to protect margins. This shift creates a transparency crisis in the programmatic CTV space, where Server-Side Ad Insertion (SSAI) makes it difficult for standard verification tools to detect sophisticated fraud. As agencies push more volume through these opaque channels to offset lower labor costs, the risk of wasted ad spend increases for streaming advertisers. The broader ecosystem must now grapple with a model where efficiency gains from AI are being captured by intermediaries rather than returned to brands. Watch for the ANA to release updated programmatic transparency benchmarks in late 2025 to see if transaction costs stabilize.
As agencies pivot away from labor-based fees, many are also struggling with household data targeting accuracy issues that further complicate the value proposition for brands investing in streaming inventory. Recent CTV brand safety gaps have further highlighted the need for better verification in these environments. To address these inefficiencies, some firms are now adopting a programmatic strategy to cut billions in wasted ad spend.
Agency compensation models have shifted significantly, with labor-based fees falling from 54% to 17% over 15 years due to AI automation. Agencies are now recouping revenue through proprietary platform fees and programmatic markups. This transition creates a transparency crisis, as rising CTV fraud and opaque transaction costs threaten advertiser budgets.
Labor-based billing has plummeted from 54% of contracts in the early 2000s to just 17% today, as agencies increasingly rely on proprietary platform fees and programmatic markups.
The shift has led to a transparency crisis where 26% of every dollar invested in programmatic advertising is lost to transaction costs, while CTV fraud rates have spiked by 140%.
Fraud has increased by 140% due to measurement gaps in Server-Side Ad Insertion (SSAI), which makes it difficult for standard verification tools to detect sophisticated fraudulent activity.
The ANA is expected to release updated programmatic transparency benchmarks in late 2025 to address concerns regarding transaction costs.
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