The Dentsu case should not be seen as a failure, because it is not, nor as an apocalyptic warning. It should be used as a mirror of an industry that needs to rediscover its relevance.

There is a word we use very frequently when talking about Artificial Intelligence. That word is “yet”. It means that what we dream of may not be possible today, but will be in the future. The word “yet” carries that sense of hope and forward-looking vision that conceals a far more concerning present reality.

This comes in the context of the attempted sale of Dentsu’s international assets, valued at around $4.5 billion, with a global footprint, a highly relevant client portfolio and a track record of success — that cannot find a buyer. One of the most significant advertising holdings in the world is experiencing a genuine lack of appetite from markets and investors to enter this business.

A closer analysis tells us that markets are liquid — there is money available to invest — but not in this business. As some potential investors have acknowledged, the classic business model of this industry does not ensure that investment will deliver a return.

When investment funds analyse a business of this scale and decide to walk away, the signal they send is not about price. It is about structural risk. It is about the difficulty the business faces ahead, the inability to generate sufficient return to justify the capital invested. But it goes further — it is about the conviction that the transformation this business will undergo in the very near future is not safeguarded by the organisational model of communication multinationals.

For decades, communication holdings grew through the aggregation of clients, talent and specialisms. They bet on scale as an engine of efficiency and profitability. They brought media, creativity, technology and consultancy under the same roof. They built global networks and replicated the model across countries. It was highly effective in a world that demanded complex, intensive execution.

That world is changing and disappearing. Artificial intelligence, media automation, technology-assisted content production and advanced data analytics are stripping economic value from many activities, for the simple reason that clients can now execute them themselves. And because of that, they cease to be differentiating.

It is in this context that investors, when looking at Dentsu, hesitate. Not because they doubt the quality of the people or what they have achieved, but because they doubt whether the current model will continue to be capable of retaining value. Capital, by nature, seeks returns commensurate with its risk. And today the risk lies not in the results, but in the architecture of the business.

I believe that in our technological evolution we will have to go back 30 years in terms of organisation. We will once again internalise practices and specialisms — much as happened with multinationals and their advertising agencies (who can forget Lintas?) that later externalised them. A similar process is now underway, with many companies believing that salvation for the next round of marketing cost reductions will come from this direction. And we will once again see specialisms brought together, having created a world of fragmentation between idea, context and platform that now needs to be reversed.

Nobody knows what the winning model of the future will look like. There are hypotheses and experiments. But what seems clear to me is that the future will be defined by companies with the courage to fail, to test new formats, to break down silos, to abandon the illusion of scale. The rest — those that remain trapped in the attempt to optimise a model the market is beginning to question — risk becoming highly efficient at everything the market will no longer want.

The Dentsu case should not be seen as a failure, because it is not, nor as an apocalyptic warning. It should be used as a mirror of an industry that needs to rediscover its relevance within its economic and social function. And it will not be alone in that search — a large part of the creative and entertainment industries will have to make that same journey.

With or without artificial intelligence, communication will continue to be central to brands, businesses and societies. The question is who will have the courage to reinvent it. For now, there is still resistance. Still!…

Opinion piece by João Santos, COO at WYgroup, written for ECO +M