39% of CMOs Are Cutting Agency Budgets. WPP Just Stopped Calling Itself a Holding Company.

On February 26, WPP told investors it would stop being a holding company. The advertising group, for years the largest in the world, unveiled a turnaround plan called Elevate28: strip out £500 million in annual costs by 2028, raise AI spending to £300 million a year, and fold its agencies into four AI-run units for media, creative, production, and enterprise work. Chief Executive Cindy Rose did not soften the pivot in the strategy briefing that accompanied the plan:

“We don’t want to be a holding company any more.”

WPP is not tearing itself down because clients stopped liking its agencies. It is doing it because the money that pays for those agencies is leaving.

The demand side shows up in Gartner’s numbers. In the 2026 CMO Spend Survey, 39% of marketing leaders said they plan to cut agency budgets. Paid media has climbed to 31.4% of the average marketing budget, a five-year high, up from 25.1% in 2021, and Gartner is explicit that the rise is funded in part by agency cuts. The top savings moves CMOs named were eliminating unproductive agency relationships and streamlining rosters. We covered the readiness gap behind that AI spend last month. The agency line is where the reallocation gets paid for, part of a broader reslicing we track in The State of AI Marketing Budgets.

The retainer is a fixed cost with a paper trail. That makes it the easiest thing to cut.

Brands are not waiting for the holding companies to finish restructuring. Jae Hopkins, marketing director at the travel operator Explore Worldwide, described the shift to Marketing Week:

“We’ve brought quite a lot of things in-house that weren’t in-house before, so we have fewer ongoing retainer-type agencies.”

Explore moved work like paid search off an external agency and onto internal staff running AI tools. It is not an outlier. Marketing Week’s survey of 2,350 marketers found 14.2% had cut agency spend because of AI in the past year, against 1.9% who spent more. The Association of National Advertisers now counts 82% of its members running an in-house agency, up from 78% in 2018.

The economics get clear once you separate the two things an agency sells. One is judgment: strategy, brand, the creative leap. The other is production: resizing the asset, building the campaign, running the keyword list. AI has collapsed the cost of the second toward zero. Kimberly-Clark told a Reuters summit in May that an AI platform built at its India hub cut the time to produce a piece of content from 24 days to two hours. When production drops from three weeks to an afternoon, the retainer that used to buy it starts to read as overhead.

The holding companies are squeezed from both directions. Clients use AI to question fees. The agencies use the same AI to cut their own labor, which shrinks the billable hours the retainer was priced on. Omnicom, after absorbing Interpublic, doubled its cost-savings target to $1.5 billion and confirmed more than 4,000 job cuts. WPP’s own headcount fell from 108,044 to 98,655 in a single year. The 1990s split of media from creative was the last reorganization on this scale. This one is being run by software.

Not all agency work is exposed equally. The shift of budget toward measurable paid media rewards agencies that can prove a number: performance media buying at scale, complex data operations, the media math a two-person in-house team cannot replicate. Strategy and brand survive because they are judgment calls a CFO cannot automate. What does not survive is the middle. Template creative, production, basic PPC management, the retainer that bundled a little thinking with a lot of executional labor and charged a markup on both.

For the CMO holding the budget, three questions decide which agency invoices renew. Does the work need judgment the model cannot make, or execution the model already does? Can the agency show a pipeline or media number, or does it show activity? And would you rebuild this capability in-house if the contract lapsed tomorrow? The relationships that answer those well are safe. The rest are a line item, and the line item is the first thing the AI-era CMO reaches for.