Why Small Agencies Beat Big Ones

Sometimes growth kills profitability

Author

Laura Betterly
July 22, 2025

This Week's Feature: Why Small Agencies Beat Big Ones

The agency industry's obsession with growth is killing profitability and owner sanity. While big agencies struggle with bureaucracy and overhead, small agencies are delivering superior results and charging premium rates. This week's deep dive reveals why staying small is often the smartest growth strategy.

The Reality Check: Small agencies consistently outperform large ones on client satisfaction and profitability per employee. They move faster, provide direct access to senior talent, and can focus on specialized expertise rather than trying to be everything to everyone.

The Game Changer: The "elastic agency" model allows unlimited scaling without fixed overhead. Instead of hiring full-time employees, successful small agencies build networks of trusted specialists who work only when there are billable projects.

The Premium Advantage: Small agencies can charge more because they offer something big agencies can't—exclusivity, personal attention, and genuine expertise. When you only work with a limited number of clients, each relationship becomes more valuable.

Your Next Move: Stop apologizing for being small and start leveraging it as a competitive advantage. The agencies that figure this out first will dominate their markets while competitors struggle with the weight of their own growth.

AI Insights: The Video Revolution is Here

AI Video Creation Hits Mainstream Over half of ad buyers are now using generative AI for video creation, with 30% of digital video ads currently built or enhanced using the technology. The number is expected to jump to 39% by 2026, according to new data from the Interactive Advertising Bureau [1].

The surprising twist? Smaller agencies are leading the charge. By 2026, small brands expect 45% of their video content to use AI, compared to just 36% for large brands. The top use case isn't replacing human creativity—it's creating multiple versions of the same video for different audiences, with 42% of agencies using AI for this purpose.

What This Means for Your Agency: AI video tools are leveling the playing field. Small agencies can now produce multiple video variations without the overhead of large production teams. The key is using AI to enhance creativity, not replace it.

Agency AI Hiring Surge Thirteen major agencies and production companies are actively hiring for AI-specific roles, signaling a fundamental shift in how the industry views artificial intelligence [2]. This isn't about replacing people—it's about building dedicated AI expertise in-house.

The Bottom Line: Agencies that treat AI as a tool to amplify human creativity will win. Those that see it as a cost-cutting measure will struggle with quality and client satisfaction.

Industry Intel: The Creator Economy Grows Up

Creator Agencies Hit the Big Leagues Brands are now spending $1.5-2 million on creator agency of record deals, marking a massive shift from one-off campaigns to strategic partnerships. The Cirqle reports a 10x increase in RFPs for creator agency of record roles, with the majority of requests now for ongoing relationships rather than project-based work [3].

Virgin Atlantic recently tapped Whalar as its creator agency of record, while Haleon brought on Collectively for a three-year partnership. These aren't social media experiments—they're strategic investments driven by C-suite executives who see the $30 billion U.S. creator economy as essential to their marketing stack.

What's Changing: Creator agencies are sometimes replacing traditional social agencies entirely, or working in lockstep with creative and media shops. The playbook has evolved from sponsored posts to episodic content, brand platform development, and integrated campaigns.

The Opportunity: Traditional agencies that can build creator capabilities or partner with creator specialists will capture this growing market. Those that ignore it risk losing clients to more agile competitors.

Media Costs Keep Rising Media inflation is accelerating, with nine of the top 10 global markets seeing greater price increases in 2025 than 2024. The U.S. is rising from 2.1% inflation in 2024 to 2.3% in 2025 [4]. Combined with the shift toward programmatic CTV buying (now 85% of purchases), agencies need to help clients navigate an increasingly complex and expensive media landscape.

Trend Watch: The Consolidation Reality

Big Agency Struggles Continue IPG Mediabrands reportedly laid off 35-40 analysts this week without warning, asking departing staff to train their overseas replacements [5]. This follows broader industry consolidation trends as large agencies struggle with overhead costs and margin pressure.

The Pattern: While big agencies cut costs and offshore talent, small agencies are capturing premium clients who value personal attention and senior-level expertise. The contrast couldn't be clearer—one model is contracting while the other is thriving.

CTV Becomes Must-Buy Connected TV inventory is rapidly becoming programmatic, with 47% expected to be biddable in 2025 (up from 34% in 2024). However, 83% of buyers still say human involvement is necessary to customize CTV deals, creating opportunities for agencies that can blend automation with strategic thinking [6].

Quick Wins: This Week's Actionable Insights

1. Audit Your Client Portfolio Use this week's small agency framework to evaluate which clients generate the most profit with the least overhead. These are your template for future growth. Download Here.

2. Explore AI Video Tools Test generative AI for creating multiple versions of existing video content. Start small with social media variations before scaling to larger campaigns.

3. Assess Creator Opportunities Review your clients' social strategies. Are there opportunities to develop creator partnerships that could evolve into ongoing relationships?

4. Plan for Media Inflation Factor 2.3% media cost increases into 2025 planning. Help clients understand that effective creative and targeting become more important as media costs rise.

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