When artificial intelligence halves the hours a job takes, time-based billing quietly halves the agency's fee too. In the disciplines I oversee, like content production, campaign builds, reporting, media optimisation, and first-draft creative, the truth is that AI tools can now cut the hours a task takes by half, sometimes more, without cutting the quality of the output.
Musa Kalenga, CEO, Brave Group asks what happens to agency fees when AI halves the hours? (Image source: © 123rf
123rf)
That is not a marginal productivity gain. It is large enough to break the model that time-based billing depends on.
A model built for slower times
For decades, the economics of most agency relationships have rested on a simple, almost invisible mechanism: time-based billing.
A team logs its hours; those hours are costed against a rate card; the rate card becomes the invoice.
It's tidy, defensible, auditable, and it has quietly taught agencies that speed is a threat to revenue, while slowness is, if not a virtue, then at least survivable.
Under a slow, largely stable rate of technological change, that flaw stayed manageable.
A senior strategist getting five percent faster at building a plan, or a designer shaving an hour off a template, was a rounding error nobody noticed.
The industry could live with a small, structural penalty on efficiency because efficiency itself moved slowly.
AI has ended that truce
Take a piece of work I know well: a monthly content and reporting retainer for a mid-sized consumer brand.
Eighteen months ago, that job occupied a team for the better part of 40 hours a month. The ideation, drafting, revising, building the performance report, packaging the recommendations for the next sprint.
Today, if AI does the first draft, much of the data-crunching and a good share of the structuring, the same standard of work takes closer to 18 hours, if not less.
But the client's problem has not shrunk. If anything, the strategic thinking has improved, because the humans on the account now spend their time judging and sharpening the work rather than assembling it from scratch.
Under a time-based fee, that account is now worth less than half of what it was 18 months ago, not because it delivers less, but precisely because it delivers faster.
The maths behind the distortion
That is the distortion, stated as plainly as I can put it: under a pure time-based retainer, revenue on a job falls in lockstep with the hours it takes to do.
This despite the value delivered improving, because the team now has time to think and refine rather than simply produce.
Nothing about the client's problem got smaller. But the invoice shrinks anyway, because that is precisely what a time-based fee is built to do.
Multiply that across an agency's entire roster of retainers, and you get a business model with a genuinely perverse incentive: adopt AI properly, and you cut your own revenue.
Resist it, or adopt it quietly while still billing the old hours, and you protect your margin.
I don't think most agency leaders are consciously choosing the second path. But I do think the model nudges plenty of quiet, unconscious choices in that direction.
Why I'm saying this out loud
I'm saying this publicly because agencies owe their clients more candour about this than they are currently giving.
It is uncomfortable to tell a CMO that the tool making our output better is also the tool making our own board nervous.
It is more uncomfortable to say nothing, and let the incentive quietly shape behaviour that clients never see and never approved.
This matters to you specifically, not just to agency finance directors.
It shows up in scope quietly renegotiated upward when it didn't need to be, in headcount that never quite shrinks even as tools do more of the work, and in retainer reviews framed around "added value" rather than hours spent.
None of that is dishonest. It is simply what a billing model produces when it rewards an agency for looking busy rather than for being effective.
The fix: Pay for outcomes, not hours
The honest fix isn't complicated, even if it is a hard conversation.
Fees need to be anchored to the scope, the outcome, or the value of the work, rather than to a headcount of hours that AI is actively shrinking.
That is the model we have been rebuilding parts of our own business around at Brave Group, not because it is fashionable, but because it is the only version of the relationship that doesn't quietly punish us for getting better at our jobs on your behalf.
But you don't need to take any agency's word for this, ours included. You need one number.
Ask the question
So, Let me make an admission that will not please every managing director in my industry: I have sat in meetings where a job got done faster, better, and to a higher standard than the brief demanded. And watched the agency finance team wince.
That reaction should trouble every marketer who signs an agency retainer. It certainly troubles me.
So here is my suggestion, and it costs nothing to ask: call your agency and ask them, directly, what happens to their revenue on your account if the job takes half the hours it used to.
Ask it about one specific piece of recurring work, like a monthly content package, a reporting cycle, a campaign build.
If the honest answer is "it falls," you are paying for hours, not outcomes, and you should ask why AI hasn't already changed that. If the answer is evasive, you have learned something too.
Efficiency should be an agency's proudest output. Under the wrong billing model, it is quietly the one thing working against you and against us.
