Basis today published its 2026 Advertising Agency Report, a survey of more than 200 advertising professionals that delivers one of the most sobering assessments of the industry's structural health in years. The findings, released April 20, 2026, show that 87.3% of agency professionals believe the traditional agency model is either broken today or will be within three to five years. Among senior leaders at the VP level or above, that figure climbs to 91.5%.

The Chicago-based company, which operates a software platform connecting media planning, operations, reporting, and financial reconciliation across programmatic, publisher-direct, search, social, and connected TV channels, conducted the annual study across 213 respondents at leading agencies. The sample is larger than prior waves - 113 respondents in 2024 and 171 in 2025 - giving the 2026 data more statistical weight and making the year-over-year declines in confidence more significant.

The traditional agency model under pressure

The headline finding breaks down further when examined by response category. According to the report, 29.1% of all respondents said the traditional agency model is already broken outright. Another 35.7% described it as "somewhat" broken. A further 22.5% said the model is not broken yet but will be within three to five years. Just 12.7% believed the model remains intact. Among senior leaders specifically, more than 70% believe the model is already broken in some form.

The traditional model in question was built on billable hours, bundled services, and human-driven execution. As the report explains, that structure is proving increasingly difficult to sustain as AI compresses timelines and clients expect more output for less cost. When a task that once required 20 hours of labor now takes two, the arithmetic of the billable-hour model breaks down.

Ryan Manchee, SVP of Brand Marketing at Basis, described the dynamic in the press release accompanying the report: "Basis' 2026 Advertising Agency Report illustrates an industry in flux, where operational complexity, economic pressure, and AI-driven disruption are forcing agencies to rethink how they work, how they deliver value, and how they are compensated. As the agency model transforms, the question now is what tools, technologies and practices these businesses will use to refit and remodel. While AI can be a business accelerator and force multiplier for agencies, it is only effective if it operates on advertising systems that are structured and connected."

Work is getting harder, client relationships more strained

Seventy percent of agency professionals said their jobs are more difficult today than they were two years ago. That figure represents a sharp deterioration in working conditions at a time when the industry is simultaneously expected to do more with less. Two-thirds of respondents - 66.2% - also said that digital advertising itself has become harder over the same period, up from 58.4% in 2025 and 58.4% in 2024, a consistent upward trend across three consecutive survey waves.

Client relationships are deteriorating in parallel. Fifty-four percent of agency professionals reported that their agency's client relationships are more strained today than two years ago, up from 50.9% in 2025 and 43.4% in 2024. The progression across three years reflects clients arriving with higher expectations and less patience, compressing timelines while increasing scrutiny over results.

Transparency remains a persistent concern. A decisive 88.3% of respondents said there should be more transparency across digital advertising, reflecting frustration with accountability gaps around ad fraud, made-for-advertising websites, incomplete performance data, and supply chain opacity. The figure has remained stubbornly high across survey years.

Operational dysfunction: processes and siloed systems

Despite years of technology investment, the top challenges facing agencies remain the same ones identified in prior waves of this research. Inefficient processes topped the list, cited by 44.1% of respondents. Siloed or disconnected systems came second at 40.4%. These two challenges are not independent - disconnected systems are a primary driver of process inefficiency, creating a reinforcing cycle that proves difficult to break.

Shrinking profits ranked third at 39.0%, followed by rising costs at 36.6%. The pairing illustrates a margin squeeze: costs rising on one side while clients push back against fee structures on the other. For senior leaders specifically, the picture is slightly more acute: inefficient processes were cited by 48.9% of VPs and above, siloed systems by 41.5%, and shrinking profits by 36.2%.

Tech stack sprawl has doubled in two years

One of the more striking technical findings in the report concerns the expansion of agency adtech stacks. Among full-service and media agencies, 36.8% now manage ten or more tools as part of their adtech and martech infrastructure. Two years ago, that figure was just 17.3% - meaning the proportion of agencies running ten-plus tools has more than doubled in that timeframe. Nearly half of all respondents - 46.7% - reported managing eight or more tools. The growth in stack complexity explains in part why inefficiency and silos remain so persistent: the more fragmented the tooling, the harder it becomes to achieve coordinated workflows.

This pattern fits a broader industry picture. IAB forecasts for 2026 show that two-thirds of advertisers now concentrate on agentic AI for campaign execution, yet most organizations lack the unified infrastructure to deploy those systems effectively. The Basis data reinforces that gap at the agency level.

AI adoption surpasses 99% - but anxiety is rising alongside it

AI is now used at over 99% of agencies surveyed, according to the report. That figure marks near-universal penetration across the sample. Daily use has reached 59.2% of agency professionals in 2026, up sharply from 15.9% in 2024 and 38.6% in 2025. An additional 27.2% use AI tools three to four times per week, meaning 86.4% of agency professionals use AI at least several times weekly.

The tasks where AI has taken hold are concentrated in the earlier, less consequential stages of workflow. Ideation and brainstorming lead at 86.9%, followed by research at 84.0%, drafting content or creative at 72.3%, and producing images or videos at 56.3%. Streamlining processes reached 52.1% and repurposing existing content 43.7%. But at the stages where AI could deliver the most operational leverage - media planning, which was recorded at 29.1%, and media buying strategy at 22.1% - adoption remains comparatively low.

Agentic AI, which allows systems to move from insight to action autonomously, has reached 46% of surveyed agencies, with 54% yet to adopt. Among those that have, the leading use cases are reporting and analytics at 61.2%, campaign brief creation at 58.2%, and content creation at 57.1%. Creative optimization reached 43.9% and personalization 36.7%. Media planning agents are used by 20.4% and media buying agents by just 9.2%.

Agentic advertising infrastructure has been expanding rapidly across the industry, with multiple platforms introducing autonomous campaign execution capabilities. Yet the Basis data shows most agencies are still deploying these tools in reporting and content functions rather than the media buying and planning tasks where the efficiency gains would be most financially significant.

For the second consecutive year, agency leaders named AI as their top investment priority. Among VPs and above, 77.7% said they plan to increase AI spending over the next 12 months. Automation tools and reporting and analytics capabilities each drew 44.7% of leaders planning increased investment, tying for second. Talent acquisition was cited by 38.3% and data management tools by 34.0%. Across all respondents, 73.7% said their organization has plans to invest in new technology to automate or streamline processes within the next year.

AI poses a revenue threat - and most agencies know it

The same technology agencies are counting on to reduce costs is also the technology most likely to compress their own revenue. Ninety percent of all agency professionals said they believe AI poses a threat to their agency's primary revenue streams. Among senior leaders, that figure reaches 95%. More than half of all respondents - 57.3% - characterized AI as a moderate-to-significant threat, with 42.7% describing it as a moderate threat and 14.6% a significant one.

The mechanism is clear. AI reduces the labor hours required to execute tasks across the full campaign lifecycle, from strategy and planning through creative, buying, and reporting. As the report notes, when a 20-hour task becomes a 2-hour task, billing models built on time and headcount begin to lose their structural rationale. Clients, increasingly aware of this compression, apply downward pressure on fees.

The number of AI pessimists - those who believe AI will have a negative impact on agencies over the next three to five years - has grown sharply. The share stood at 19.9% in 2025. In 2026, it has risen to 32.0%. Even among those who remain positive about AI's impact, the character of that optimism has shifted: only 26.8% now believe the impact will be "mostly positive," compared to 36.3% who held that view the year before. Among senior leaders, more than 25% now expect AI to have a net negative impact on agencies, roughly double the number who held that view in 2025.

The ad industry's relationship with AI across 2025 and early 2026 has been characterized by exactly this ambivalence, with platforms racing to launch agentic capabilities while practitioners reported operational chaos distinguishing actionable automation from vendor hype.

In-housing accelerates as AI lowers the barriers

The primary structural barriers to brand in-housing have historically been talent and infrastructure - two things that AI has begun to erode. A lean internal team equipped with the right tools can now execute what once required a full-service agency relationship. That shift is measurable in the Basis data: 65.3% of agencies said that in the past 12 months, at least some clients moved work that the agency previously handled in-house. The figure adds to the client tension data, reflecting pressure that compounds year on year.

In-housing was also cited as a challenge by 23.9% of all respondents and by 29.8% of senior leaders - a notably higher proportion at leadership level, suggesting that agency executives are watching the trend with more concern than their teams below.

Layoffs, workforce confidence, and the talent pipeline

Nearly 40% of agencies - specifically 39.9% - reported conducting layoffs within the past 12 months. The workforce reductions reflect agencies adjusting headcount in response to AI-driven efficiency gains and the resulting downward pressure on margins. Layoffs driven by AI adoption have been documented across multiple data and advertising technology companies throughout 2025 and into 2026.

For the first time in the survey's history, fewer than half of all agency professionals feel optimistic about the future of digital advertising. Specifically, 48.8% described themselves as feeling good, optimistic, or confident about digital advertising's future. The figure was 56.1% in 2025 and 62.8% in 2024. The decline of nearly 14 percentage points over two years marks the first time confidence has fallen below the 50% threshold.

Industry confidence among leaders has fallen even faster. Senior leaders who felt optimistic about digital advertising's future stood at 72.5% in 2024, dropped to 64.6% in 2025, and now sit at 51.1% in 2026 - a cumulative decline of 21.4 percentage points in two years.

A confidence gap is emerging between leadership and junior staff that carries long-term implications. Senior leaders remain relatively confident about the futures of their own agencies at 73.4%, while entry-to-mid level employees report confidence in their agency's future at just 57.1%. The 16-point gap reflects an uneven distribution of anxiety across organizational levels. Junior roles are the ones most exposed to AI-driven displacement, and 80.7% of entry-to-mid level employees said they are likely to search for a new job within the next 12 months. Only 27.7% of respondents overall said they were somewhat or very likely to job-hunt - suggesting most workers are holding their positions rather than actively seeking moves, but that the pressure is concentrated among those with the least tenure.

Why this matters for the marketing community

Global advertising spend is projected to cross $1 trillion for the first time in 2026, according to industry forecasts cited in the Basis report. That growth creates real opportunity. But as programmatic advertising crossed $162.4 billion in 2025 in the US alone and agentic AI begins reshaping how campaigns are bought and sold, the question of which agency structures can survive is pressing. An industry in which nearly nine in ten professionals doubt the long-term viability of the foundational business model cannot continue in its current form indefinitely.

The data points to a set of structural adaptations that the most durable agencies will need to pursue: consolidating fragmented tech stacks, eliminating siloes that drive inefficiency, investing in AI infrastructure that connects rather than fragments workflows, and rethinking revenue models that no longer work when AI compresses time dramatically. The report frames these not as optional improvements but as conditions for survival.

For professionals in paid search, programmatic, and broader digital media, the Basis findings reinforce a pattern visible across multiple 2026 industry outlooks: the organizations that treat AI adoption as a technology checkbox rather than a structural transformation are the ones most likely to find themselves on the wrong side of the confidence gap.

Timeline

  • 2023: Basis begins tracking AI usage in its annual agency survey; 32.7% of respondents reported not using AI at all, with daily AI use at just 9.9%
  • 2024: Basis surveys 113 agency professionals; daily AI use was 15.9%; 62.8% of respondents felt optimistic about digital advertising; agencies managing 8 or more adtech tools stood at 22.1%
  • 2025: Basis surveys 171 agency professionals; daily AI use reaches 38.6%; industry optimism falls to 56.1%; 50.9% of agencies reported more strained client relationships
  • December 2025: WPP Media projects global ad spending to surpass $1 trillion; programmatic advertising reaches $162.4 billion in the US with 20.5% year-over-year growth
  • January 2026: IAB releases 2026 Outlook Study forecasting 9.5% US ad spend growth, with five of six top advertiser priorities linked to AI
  • January 2026: Mediaocean survey shows 54% of marketers increasing AI media spend while 42% struggle with data quality issues limiting broader implementation
  • January 5, 2026: PubMatic launches AgenticOS with live campaigns running through agent-led workflows, partnering with WPP Media, Butler/Till, and MiQ
  • February 26, 2026: IAB Tech Lab formally names its agentic initiative AAMP, consolidating the Agentic Advertising Management Protocols under a single architecture
  • April 16, 2026: IAB releases 2025 Internet Advertising Revenue Report, showing US digital ad revenue reaching $294.6 billion with programmatic crossing $162.4 billion
  • April 20, 2026: Basis releases the 2026 Advertising Agency Report, based on 213 respondents; 87.3% believe the traditional agency model is broken or will be; daily AI use reaches 59.2%; fewer than half of agency professionals feel optimistic about the industry's future for the first time in the survey's history

Summary

Who: Basis, a Chicago-based advertising software company operating since 2001, surveyed 213 advertising professionals at leading agencies for its annual industry study. Ryan Manchee, SVP of Brand Marketing at Basis, commented on the findings.

What: The 2026 Advertising Agency Report found that 87.3% of agency professionals believe the traditional agency model is either already broken or will be within three to five years. The report documents accelerating AI adoption, rising layoffs, client in-housing, tech stack sprawl, and a historic drop in industry confidence below the 50% threshold for the first time.

When: The report was released on April 20, 2026. The survey covered the current state of advertising agencies as of early 2026, with comparative data going back to 2023 and 2024.

Where: The findings apply to the US advertising agency industry, with Basis headquartered at 11 E Madison St, 6th Floor, Chicago, IL 60602. The full report is available at basis.com/reports/2026-advertising-agency-report.

Why: The report matters because it documents structural cracks in the agency model at a moment when global advertising spend is projected to cross $1 trillion for the first time. As AI compresses the labor-intensive work on which billable-hour models depend, and as brands increasingly bring work in-house, agencies face simultaneous pressure on revenue, workforce, and operational efficiency. The findings signal that the industry has moved past theoretical disruption into measurable decline of confidence in the existing model.

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