After a year of mergers, the value test awaits ad agencies in 2026

It's December 1, 2025, and the advertising industry stands at a crossroads. Today, Omnicom and Interpublic Group are set to announce their new leadership structure, formally completing a $13.5 billion merger. But this is just one headline in a year that has convulsed the industry.

In 2025, India's advertising expenditure was predicted to grow by just 9%, the lowest increase since 2017, according to the PitchMadison Ad Report. For the first time, Indian adex growth trailed the global average of 11%. WPP's revenue declined 8.4% year-on-year in Q3, prompting CEO Cindy Rose to call the company's performance "unacceptable." Publicis seized major accounts from WPP, including Mars' $1.7 billion global media business and Coca-Cola's $700 million North America account. The Competition Commission of India (CCI) raided GroupM, Dentsu, Madison, Publicis, and IPG over alleged price-fixing. Dentsu cut 3,400 jobs globally after reporting an expected operating loss of ¥3.5 billion.

With all these upheavals, the advertising industry is facing its biggest test in 2026: proving it can still create value that clients can't get anywhere else.

K V Sridhar (Pops), Founder & CCO of Hypercollective, is blunt about the industry's current state. "Agencies today can't claim superiority in strategy because global consulting firms do it better," he says. "They can't claim supremacy in storytelling because the best storytellers have moved elsewhere. With content consumption exploding across OTT, YouTube, and social platforms, the ability to craft platform-native stories is crucial, something agencies are still grappling with. On top of this, AI has become a major creative competitor."

According to the numbers, traditional TV grew just 5% in 2024, its slowest pace in eight years outside the COVID year, while losing nearly 2,500 advertisers to digital platforms, influencer marketing, and e-commerce advertising. Digital advertising captured a 42% share of total adex, growing 14%. Connected TV advertising surged 35% to reach Rs 1,500 crore. Meanwhile, agencies struggled to emphasise their relevance.

The value problem

The consolidation wave of 2025 was supposed to fix this. The Omnicom-IPG merger brought together McCann, Lowe Lintas, FCB, DDB Mudra, BBDO, and TBWA under one roof, with reports suggesting DDB may be retired altogether. Publicis merged Leo Burnett and Publicis Worldwide into a single entity called 'Leo' in January, unifying 15,000 creatives across 90 countries. WPP let go of the GroupM brand in May, consolidating media operations under WPP Media. Madison World, India's last major independent, found itself in acquisition talks with both Publicis and Havas.

But mergers solve structural problems, not value problems. Pops argues that agencies contributed to their own downfall. "Agencies also contributed to their own decline by cutting senior creative leaders to reduce costs," he observes. "What remains is a young workforce with little mentorship, resulting in scattered thinking and inconsistent output. Clients are now turning to comedians, filmmakers, freelance writers, and influencers to create content because they no longer see value in agencies."

The evidence is everywhere. The Omnicom-IPG merger projected $750 million in cost savings, but IPG laid off 3,200 employees this year, including 800 in September alone, and vacated 730,000 square feet of office space. Omnicom cut 3,000 roles in 2024. WPP's market value slipped below $3.4 billion, a steep fall from its former £25 billion peak.  

The talent exodus further compounds the crisis. Earlier, graduates from top management institutes aspired to work in advertising for its glamour and influence. Today, they prefer startups and tech companies. Even students from MICA and Symbiosis aren't choosing advertising anymore, Pops observes. On the creative side, the best young talent moves directly into OTT, YouTube, content studios, or builds their own channels.

Nisha Singhania, CEO & Managing Partner of Infectious Advertising, argues that 2026 will test whether agencies can demonstrate real value beyond execution. "After a year of churn and consolidation, the industry must prove it can marry creative bravery with business impact," she says. "The biggest challenge is not competition, it's relevance. Agencies that cannot tangibly move the revenue needle for clients will struggle to justify their existence."

Rakesh Hinduja, Co-Founder of Wondrlab, on the other hand, believes the central challenge is different. 

"The biggest test in 2026 will be whether the industry can move from structural consolidation to operational integration," he says. "Because merging P&Ls and office networks is the easy part. Making these systems actually work together, culturally, technologically, and creatively, is where the real battle lies."

He warns that if consolidation becomes merely a cost-cutting exercise, the industry will face brand dilution, talent exits, and increased fragility in client relationships. The Indian market presents a unique test case. Six iconic creative brands now sit under one roof with the Omnicom-IPG integration. Preserving their individuality while wiring them into shared media, data, and tech infrastructure will require imagination and discipline.

When algorithms take over

The competitive threat isn't just other agencies anymore. Consultancies like Infosys, TCS, and Deloitte are positioning their AI capabilities to create campaigns. Microsoft partnered with WPP. Tech platforms are building their own creative tools. A December 2024 Bain report revealed that retailers, including Amazon and Walmart, implemented AI-powered targeting campaigns during the holiday season, achieving a 10% to 25% increase in ad spend returns.

Pops sees this as an existential crisis for agencies. "If agencies now chase algorithms like everyone else, what makes them different?" he asks. "Why choose an Ogilvy or a Leo Burnett if they operate the same way as Microsoft, TCS, Deloitte, PwC, or any tech or consulting firm? When everyone uses the same tools, the distinction disappears."

Publicis raised its full-year organic growth forecast to nearly 5% after boosting revenues by 10.9% in the first half of 2025, crediting a €1 billion annual investment in AI and technology. CEO Arthur Sadoun described Publicis as "the only one that is growing." WPP Media (previously GroupM)'s year-end global advertising forecast projected that pureplay digital advertising would grow 10% in 2025, making up 72.9% of total advertising and rising to 76.8% by 2029.

The problem, according to Pops, is that agencies have reduced themselves to operational work. "Today, agencies simply manage Meta dashboards, track algorithms, and send reports," he says. "That's not value addition, that's operational work anyone can do. Agencies need to rediscover their strengths, understand what's expected of them, and redefine how they contribute to marketing and business growth. If they don't, they're finished."

Singhania argues that agencies must reposition themselves fundamentally. "With holding companies merging, independents scaling and consultancies entering our lanes, agencies need to reposition themselves from 'creative vendors' to strategic growth partners," she says. "Marketers don't need more decks or more ads. They need clarity, insight, and sharp problem-solving. Agencies that can connect creativity to outcomes, loyalty, pricing power, category expansion, margins, will remain indispensable."

This requires operational reinvention. She points to specific changes needed in 2026: productising services so clients know exactly what they're buying, investing in talent with hybrid skill sets combining strategy, technology and creativity, embracing AI as a co-pilot to improve quality and speed, building integrated teams that think end-to-end rather than in departmental silos, and creating processes that allow ideas to move from strategy to execution quickly.

Rebuilding trust through impact

The regulatory environment of 2025 added another layer of crisis. In March, the CCI raided major agencies over alleged price-fixing. The investigation alleged that agencies colluded with broadcasters via WhatsApp groups to fix advertising rates, potentially overcharging advertisers. Penalties could reach up to 10% of global turnover for each year of violation. The raids came just before the Indian Premier League season, a peak advertising period.

Dentsu India confirmed it had approached the CCI under the Leniency framework in February 2024, calling it a proactive step toward reform. Madison Media moved the court to halt the probe. Publicis filed a petition seeking access to the investigation documents. For clients already questioning agency value, the regulatory cloud reinforced doubts about transparency and accountability.

Singhania emphasises that client trust today hinges on four things. "Client trust today hinges on speed with substance, fast but rooted in insight; transparency with clear costing, clear process, clear expectations; measurability, not vanity metrics but business KPIs; and cultural depth where brands expect agencies to understand the cultural pulse, not just trends," she says.

Hinduja argues that trust can only be rebuilt through demonstrated impact. 

"Trust today is earned through impact, not promises," he says. "Agencies will rebuild trust by proving value in two simultaneous cycles: impact every time, quarter-to-quarter performance, and brand building over time, long-term compounding value."

He identifies three defining elements, including radical transparency with no black boxes in media, tech, or production; measurable outcomes with clear linkage from creative and media actions to business lift; and cultural intelligence, meaning ideas that move according to culture but remain anchored in brand strategy.

Marketing spends are growing 20% to 22% annually while agencies continue to shrink or die. Digital agencies, influencer ecosystems, and content creators now command the bulk of marketing budgets. 

Pops offers a sharp example of what agencies used to do well. "Look at SUVs," he says. "Who needs a 4x4 in Mumbai? Most people never go off-roading, yet everyone wants one. Why? Because desire was created. Advertising made it aspirational. That's what great advertising does: makes people who don't need your product want it anyway. Without desire, you have only need-based demand, and you stay small."

He points to brands like Cadbury, Coca-Cola, and Nestlé, which survived crises because they had deep emotional connections with consumers built through advertising. Without that equity, brands simply disappear, as Nirma did. But building that equity requires agencies to create desire, not just execute transactions.

The test of 2026 isn't about surviving mergers or navigating regulatory scrutiny. It's about whether agencies can rediscover their core, whether they can add strategic value, elevate storytelling, and highlight the real power of creativity in improving brand performance. Brands will always bet on whoever can create better work, whether it's a carousel, a Reel, a podcast, or a TVC. If agencies can prove their creative advantage, business will return. But currently, they are unable to demonstrate this, and algorithms are taking over by default.