Digiday’s 2026 media agency research finds that agencies are expanding AI-powered services while advertisers redirect spending toward AI search, creating new business opportunities and new operating costs.

WHAT’S HAPPENING

Artificial intelligence is changing how advertising agencies operate, where their clients spend money, and how agencies generate revenue.

According to the Digiday Media Agency Report 2026, published October 5, advertising agencies are moving beyond using AI as an internal productivity tool and increasingly offering AI-powered products and services to paying customers.

The report is based on a third-quarter 2026 survey of 30 agency professionals and a focus group involving five senior media agency executives. Its findings provide a directional view of industry activity rather than a statistically representative picture of the entire advertising industry.

The findings point to four important developments:

The shift is occurring on two fronts.

First, advertisers are increasingly interested in reaching consumers through AI-powered search and discovery tools rather than relying exclusively on conventional search engines.

Second, agencies are developing new offerings around AI-generated creative content, automated research, campaign optimization, and business intelligence.

Digiday reports that 34% of surveyed agencies are monetizing AI through strategic roadmaps or audits, while 31% are charging additional fees for AI capabilities added to existing services.

Some agencies are already putting these applications into practice.

Go Fish Digital described developing AI-generated avatars and tools that improve product imagery and optimize e-commerce advertising feeds.

UM discussed using AI-generated representations of target consumers to conduct simulated focus groups and gather audience insights.

These systems can help agencies produce materials and examine marketing strategies more quickly, although synthetic consumer responses are not necessarily substitutes for research involving real customers.

The central development is that agencies are beginning to sell AI capabilities as distinct services rather than treating AI solely as an internal operating expense.

WHY IT MATTERS

Advertising has traditionally depended on a combination of creative expertise, audience research, media placement, and campaign management.

AI is changing the economics of those activities.

Tasks that previously required substantial manual work may now be completed more quickly with AI-assisted tools.

That creates opportunities to improve productivity, but it also raises questions about what agencies should charge and how they demonstrate value to customers.

For example, an agency using AI to generate multiple versions of an advertisement may reduce production time.

However, if customers recognize that the work requires fewer labor hours, they may question traditional pricing arrangements.

Agencies therefore face a commercial decision.

They can use AI simply to reduce expenses, or they can develop new capabilities that customers are willing to purchase.

The Digiday findings suggest many are pursuing the second approach.

Another significant development involves AI search visibility.

Traditional search marketing focuses heavily on helping websites appear in search-engine results.

AI-powered systems increasingly generate direct responses to consumer questions, sometimes reducing the need to visit individual websites.

That introduces a new challenge for businesses.

A company may have an established website and conventional search rankings but still struggle to appear accurately in AI-generated recommendations or summaries.

Agencies are responding by exploring generative engine optimization, often called GEO.

This includes improving the quality, clarity, accessibility, and consistency of business information so AI-powered discovery systems can better understand what a company offers.

Unlike traditional paid advertising, appearing in an AI-generated response generally cannot be guaranteed by an outside marketing agency.

Different AI systems use different sources and methods, and their answers can change.

Nevertheless, businesses have a practical reason to pay attention: customer discovery may increasingly occur through AI-generated answers rather than conventional lists of websites.

This creates demand for services that help companies communicate accurate information across both traditional search and emerging AI discovery channels.

There is also a financial reality.

AI is not free to operate.

Agencies must account for subscriptions, computing usage, software integration, employee training, security, maintenance, and ongoing support.

Digiday found that 31% of surveyed agencies experienced AI implementation costs above expectations.

At the same time, 70% reported cost savings from making tasks more efficient.

Those findings illustrate an important distinction.

AI can lower the cost of performing individual tasks while increasing the total amount a business spends on technology.

Successful adoption depends on whether the combined productivity improvements and additional revenue exceed the costs.

That is particularly relevant for smaller businesses considering AI subscriptions or outsourced AI services.

A useful AI investment should solve a specific problem, improve a measurable process, or produce value that justifies its ongoing expense.

WHO BENEFITS

– Advertising agencies developing AI services: Can create additional revenue streams through AI-powered research, content development, campaign optimization, and consulting.

– Small and midsize businesses: May gain access to sophisticated marketing capabilities without building large internal technology departments.

– AI software providers: Could benefit from agency demand for automation platforms, content-generation tools, analytics, and integrations.

– Marketing consultants and specialists: Can develop services involving AI-search visibility, data organization, customer research, and workflow implementation.

– E-commerce businesses: May improve the speed and efficiency of product-content production and advertising management.

– Companies with accurate, well-organized information: May be better positioned to make their products and services understandable to AI-powered discovery systems.

– Businesses measuring AI returns: Can make better purchasing decisions by comparing operational savings and revenue opportunities with recurring technology costs.

WHO LOSES

– Traditional agencies unwilling to modernize: May face increasing competition from providers offering more efficient or specialized AI-enabled services.

– Businesses relying exclusively on conventional search: Risk overlooking changes in how customers discover products and services through AI.

– Agencies with poorly managed AI expenses: Could see technology costs rise faster than the revenue or productivity improvements they generate.

– Providers selling undifferentiated AI content: May encounter pricing pressure as basic automated production becomes more accessible.

– Businesses paying for AI without measurable benefits: Could accumulate recurring expenses without meaningful improvements in sales, efficiency, or customer satisfaction.

– Employees performing highly repetitive marketing tasks: May face changes in responsibilities as agencies automate portions of research, production, and reporting.

– Customers receiving inaccurate AI-generated information: May be exposed to misleading business descriptions, unsuitable recommendations, or poorly verified advertising content.

WHAT HAPPENS NEXT

The next stage of AI adoption in advertising will be determined by whether agencies can convert technological capabilities into sustainable commercial results.

The Digiday report identifies growing investment and new service offerings, but several important questions remain.

Will AI search become a dependable customer-acquisition channel?

Advertisers will need better ways to measure visibility, referrals, leads, and actual sales generated through AI-powered discovery.

Simply appearing in an AI response does not necessarily create revenue.

Can agencies charge more for AI-enhanced services?

New offerings must demonstrate value beyond what customers can obtain through widely available AI tools.

Specialized knowledge, reliable implementation, integration with existing systems, and measurable business outcomes may become important differentiators.

Will AI reduce operating costs over time?

Agencies will need to monitor software expenses, model usage, employee training, and the cost of maintaining multiple AI systems.

The report already suggests that controlling technology expenses is becoming an important management responsibility.

How will agencies demonstrate that AI-generated marketing works?

Producing advertisements or research more quickly is useful, but businesses ultimately need results.

Conversion rates, customer-acquisition costs, qualified leads, retention, and profitability will remain important measures.

Will AI change the relationship between agencies and their customers?

Businesses may increasingly expect agencies to provide ongoing technology services rather than occasional advertising campaigns.

That could create opportunities for recurring subscriptions, managed AI systems, and customized business applications.

However, ongoing services also create obligations involving reliability, data security, customer support, and maintenance.

For smaller businesses, the immediate opportunity is not necessarily to replace their existing marketing operations.

It is to determine where AI can improve customer communication, simplify administrative work, strengthen online visibility, and support measurable business growth.

A practical starting point is reviewing how customers currently find the business, what questions they regularly ask, and which processes consume the most employee time.

From there, companies can evaluate whether an AI-powered service addresses a genuine need.

The next 12 months will provide useful evidence as agencies increase spending on AI search and expand their commercial offerings.

Further research involving larger samples and independently measured financial outcomes will be important in determining whether the emerging business models are profitable and sustainable.

The larger shift is clear: Artificial intelligence is moving from an internal productivity tool toward a product and service that businesses can purchase directly. Digiday’s 2026 research provides early evidence that advertising agencies are adapting their business models to this change. The companies that succeed will be those that turn AI capabilities into reliable, measurable customer value while controlling the costs of delivering those services.