The AI Agency Landscape with David Jones // BrXnd Dispatch vol. 44
On holding cos, in-housing, and the cascading impacts of AI
You’re getting this email as a subscriber to the BrXnd Dispatch, a (roughly) weekly email at the intersection of brands and AI. Wednesday, May 8, was the second BrXnd NYC Marketing X AI Conference, and it was amazing. If you missed it, I posted the first talk earlier this week and all the rest will be going up on YouTube. The fine folks at Redscout were kind enough to do a quick turnaround writeup the day after the event, so you can check that out for now.
Leading up to my May conference, I got a chance to talk to an amazing set of folks who are thinking about this intersection of marketing and AI. One of them was David Jones, CEO and founder of The Brandtech Group. Brandtech is a different kind of holding company with a focus on technology and in-housing (as well as an impressive portfolio of investments). They recently raised $115 million and were valued at $4 billion. I’ve known David for about a decade now, and it’s been fun to watch him build Brandtech into what it’s become. We had a thirty-minute conversation before the conference about the state of AI, what they’re up to, and why brands are increasingly bringing this stuff inside their walls. It’s edited lightly for readability. Hope you enjoy it.
Noah Brier: To start us off, can you give me a five-sentence pitch on The Brandtech Group?
David Jones: We launched the company in 2015 with the belief that you could do all marketing better, faster, and cheaper using technology. Machine-generated content and AI were core verticals from the start. Fast forward to today, we're now a billion-dollar revenue company, working with 49 of the top 100 global advertisers. Our Gen AI marketing platform, Pencil, launched in 2018, has created a million ads across 5000 brands and spent a billion dollars of media. We're in a unique position, having done this for years, to lead in a space where many are just starting.
NB: How do you view the landscape, especially with big agencies and holding companies? Are they keeping up?
DJ: One of my favorite quotes is the Henry Ford one: "You can’t build a reputation on what you are going to do." Once ChatGPT exploded, everyone was like, "Oh my God." I think all the analysts and investors turned to the holding companies and said, "Isn't this going to put you out of business?" So they all suddenly had to desperately pivot and start talking about what they're going to build. But if you're going to be slightly mean about it, I don't think the ad holding world has ever successfully built a tech product. Now that doesn't mean it's impossible, but it does mean it's unlikely. The most exciting and interesting things that are happening aren't there. We talk to a lot of clients who say, "Look, you've got a product I can use now. It's been in market since 2018, and you've got all the learnings that come with that." When Pencil started, about one in 10,000 ads it created were usable. Today, it's 10 out of 10. They’ve realized it's going to be a tectonic shift in marketing and advertising, leading to a desperate scramble to try and be part of that.
NB: There’s a lot of talk about AI replacing jobs. What’s the atmosphere like inside The Brandtech Group compared to larger agencies?
DJ: When Sam Altman said 95% of what agencies do today will be done by generative AI, our reaction was, "Exactly. That’s why we built The Brandtech Group." We’ve been on a journey. We invested in our chatbots in 2016, did the world’s first influencer AI chatbots with CoverGirl for Kalani Hilliker, and invested in AI for media planning and AI data. We invested in AI Foundation in 2018, and I went on the board as they built digital twins. There’s an episode where digital Deepak Chopra goes on Jimmy Kimmel and does a guided meditation. Reed Hoffman recently put out something that aligned with what AI Foundation was doing. (Editor’s Note: Amanda Kahlow, CEO of 1mind, is bringing this technology to market for B2B sales and marketing. She spoke at the 2024 BrXnd NYC Conference.) We were learning and progressing, but back in 2015, I would use an AI app to instantly destroy something in the room and say, "I can do that for free now," while the industry was still charging hundreds of thousands of dollars and taking weeks. This is the arrival of what we set out for, so we’re all excited about it. What keeps us up at night is ensuring we remain the world's number one generative AI marketing platform. Fast Company named Pencil the only Gen AI marketing company among the world's most innovative companies. We’re at mile one of the marathon, and my obsession is to make sure we don’t falter five years down the line. Our mantra internally is case studies beat press releases—proven results over future promises.
NB: There’s obviously a lot of focus on the creative side, and you’ve talked a lot about Pencil. That’s the first place everybody thinks about AI making all the ads. But what about the operational side? How much have you thought about where AI integrates into the operational process of being a large agency?
DJ: Look, I think I'll give you two answers to that. Firstly, there is not a single thing that humans do today that you cannot do better, faster, and cheaper using generative AI. Generative AI is horizontal, not vertical. E-commerce was a vertical, social media was a vertical, and even the internet could be seen as a vertical—you could choose to do or not do social media. Generative AI, however, changes everything. It’s like electricity or water. This means there’s nothing we do today that we couldn’t do better using generative AI.
Secondly, focus is key. We're not yet capable of doing everything. So, we have to decide on the most important things to focus on. We actually don’t own any agencies, and that was a deliberate choice. We said we would never buy traditional agencies or traditional media because it’s a highly competitive industry that doesn’t grow fast and isn’t valued highly by investors. We believe massively in in-housing, and this has been turbocharged by AI. Clients don’t want all of this AI stuff to be external—they want it in-house. And we acquired and invested in creator economy companies and technology.
If you look at the creator economy, the mobile phone turned everyone into a creator, and generative AI has turned everyone into an ad agency. Sixty million people make their living in the creator economy without working in ad agencies. Just think what they can do now. We lived through the TV era—high cost, high quality—and the mobile social era—low cost, low quality—and we’re now heading into the low-cost, high-quality era. Our influencer businesses, like Collectively and contemporaries like Mofilm, are now on steroids because of generative AI. The first step is helping train creators on how to use generative AI.
Right now, we’re obsessively focusing on scaling and growing what we’re doing with Pencil. We want to ensure that every business in our group is using Gen AI to enhance what they do. There are a million uses: think about talent, for example. I was chatting with someone who invested in a business using AI on invoices, and they can find billions of dollars of errors. Not billions of dollars of misbilling, but errors in order numbers and such, which makes businesses more efficient.
Today, our focus is on the things that help our clients the most. We might be neglecting a bit of what we could do better internally, but we’ll get to everything in time.
NB: The in-housing trend is interesting. I hadn't thought about it exactly that way. I know it’s a big part of your business, but I’ve been obsessed with the idea that the build vs. buy decision is shifting. AI models are so powerful that maybe it makes more sense to build rather than buy. Does that resonate with you? How does that intersect with the in-housing trend you've been part of for a decade now?
DJ: On the in-housing piece, it’s driven by concerns about Gen AI. One big concern is whether your data is being used to train AI that could benefit your competitors. With in-housing, people are inside the client’s organization on the client’s systems, not sitting in an external agency where you don’t know what’s happening with your data.
Humans can complicate technology. If you can create 100 versions of an ad in two and a half minutes, but it takes two weeks to present them and get feedback, or if a creative writer needs a month to add their special touch, you lose the speed advantage. The proximity of having people inside client organizations provides strength.
On the bigger picture, what brands and clients look for has changed significantly in the last 18 months. Initially, there was excitement and curiosity about using AI models. People wanted to make sure they could bring their own models and not be locked into one. Now, they’re asking, “What should we be doing?” We set up a “brand tech brain” within our organization to lead and control this, and it’s really played out over the last 18 months.
NB: I asked Howie, the CEO of Airtable, the same question: For people, especially at brands, who are trying to wrap their heads around this and feel like they’re staring over the edge of a cliff, what advice are you giving them? Where should they go next?
DJ: This is going to be the single biggest disruption I’ve seen in my career, bigger than the internet and mobile. Whether you like it or not, you can’t do anything to stop it. So, jump in. Play with every single tool, experiment, and get hands-on. People are scared of technology, fearing job loss, but history shows that’s not how it plays out. I asked ChatGPT and Gemini to write essays on why humans shouldn’t worry about generative AI taking their jobs, and it’s fascinating to see the different perspectives.
Experimenting is easier than with something like social media because you don’t have to post it for the world to see. The speed of change is unprecedented. There’s a quote that we always overestimate what can happen in two years and underestimate what can happen in ten—maybe not this time. Every major tech company is spending billions on AI, saying it will change everything. It might become a self-fulfilling prophecy.
As long as you’re experimenting and staying engaged, you’ll be fine. You can’t know everything—there’s too much happening too fast. Focus on staying plugged into what’s going on. Normal humans might know three things you don’t, and you’ll know three things they don’t. It’s about not being paranoid and making sure you’re aware of the developments.
Thanks for reading, subscribing, and supporting. As always, if you have questions or want to chat, please be in touch.
Thanks,
Noah