With OpenAI moving into ads - and platforms like TikTok becoming more aggressive on monetization - I’ve been thinking about what this means for the broader advertising landscape.
Regarding the expanding TAM: I think the next wave of 'found money' for platforms will come from cannibalizing Ad Agencies. Tools like Advantage+ are essentially insourcing the work of intermediaries. If platforms can capture the margin that brands previously paid to agencies for optimization and operations, that's another structural lift to the digital ads TAM that isn't dependent on GDP.
While the efficiency gains from AI are undeniable, I believe your perspective contains a simplification fallacy regarding the logic of disintermediation. The value of an ads agency also encompasses brand strategy, cross-platform integration, and cross-channel ROI optimization. Furthermore, a symbiotic relationship exists between platforms and agencies. Platforms actually rely on agencies to achieve long-tail customer coverage. If a platform were to completely bypass agencies, it would likely struggle to service SMB clients efficiently, ultimately damaging its own ecosystem.
Take the Douyin (TikTok China) ad ecosystem as a prime example: mid-tier brands rely almost exclusively on core certified agencies. The platform, in turn, incentivizes these agencies through rebate structures and technical support, encouraging them to scale their client base and expand the overall ad spend 'pie.'
In my view, platforms will indeed automate the execution layer, but agencies will pivot toward the strategic layer, creating a complementary synergy with the platforms. The future growth of the market will be driven by a dual engine with both the efficiency of AI-powered tools and the high-value upgrade of agency services, rather than the simplistic elimination of intermediaries.
China's e-commerce penetration rate is 26.1%—seen in that light, the advertising wallet is even bigger.
Regarding the expanding TAM: I think the next wave of 'found money' for platforms will come from cannibalizing Ad Agencies. Tools like Advantage+ are essentially insourcing the work of intermediaries. If platforms can capture the margin that brands previously paid to agencies for optimization and operations, that's another structural lift to the digital ads TAM that isn't dependent on GDP.
While the efficiency gains from AI are undeniable, I believe your perspective contains a simplification fallacy regarding the logic of disintermediation. The value of an ads agency also encompasses brand strategy, cross-platform integration, and cross-channel ROI optimization. Furthermore, a symbiotic relationship exists between platforms and agencies. Platforms actually rely on agencies to achieve long-tail customer coverage. If a platform were to completely bypass agencies, it would likely struggle to service SMB clients efficiently, ultimately damaging its own ecosystem.
Take the Douyin (TikTok China) ad ecosystem as a prime example: mid-tier brands rely almost exclusively on core certified agencies. The platform, in turn, incentivizes these agencies through rebate structures and technical support, encouraging them to scale their client base and expand the overall ad spend 'pie.'
In my view, platforms will indeed automate the execution layer, but agencies will pivot toward the strategic layer, creating a complementary synergy with the platforms. The future growth of the market will be driven by a dual engine with both the efficiency of AI-powered tools and the high-value upgrade of agency services, rather than the simplistic elimination of intermediaries.
Inspiring thought , how to contextualize how big that is?