Does Tesco’s AI ad platform spell the end for agencies?

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Brands can use Tesco’s Media Creative Studio to generate adverts

Earlier this month, Tesco’s retail media arm dealt what could be a killer blow for creative agencies. It announced the launch of a generative AI tool, expected later this year, to help brands “speed up and scale creative”.

Brands will be able to upload their “brand kit” of fonts, brand colours and logos; campaign information such as ad copy, product packshots, background images and pricing; and “automatically generate” ads “in all required sizes, fully compliant with Tesco’s specifications”.

So where does that leave the agencies producing the creative work for fmcg brands? What’s in it for Tesco? And as AI takes on more of the work behind ads and marketing, are agency days numbered?

“What Tesco is actually offering brands is a studio delivery service, rather than the kind of transformational creative service provided by advertising and creative companies,” says Rania Robinson, CEO of Quiet Storm, which has worked with Haribo, Tango and Vimto.

Indeed, spend on ad production – the thrust of the Tesco Media Creative Studio – has already mostly moved out of expensive ad agencies.

Initially, it was channelled into dedicated production agencies, then offshore and now into generative AI, explains Chris Woodward, executive director of Oliver, which builds and runs in-house agencies for the likes of Dove, Rexona and Marmite.

“This is a natural evolution and the whole market is following,” he adds.

Stacy Gratz

Stacy Gratz, sales and marketing director at Tesco Media & Insight Platform, launched its AI-led Media Creative Studio earlier this month

Tesco has made a “wildly clever move”, says Olaf van Gerwen, founder and global creative director of Chuck Studios, which has worked with Heineken, Tony’s Chocolonely and Lipton.

Any “creative agencies that survive on this kind of production work are going to feel the squeeze. And it will hurt,” he says. But arguably, they should have seen it coming.

There’s little argument against AI to handling the grunt work. “Let’s be honest: no one at 12 years old ever stared out the window dreaming, ‘One day I’ll design an endcap for discounted baked beans’.

“So here we are, keeping brands delicious while the robots take care of the boring stuff,” says van Gerwen.

But more creative campaigns are a very different kettle of fish. In these cases, AI “can assist, enhance and even inspire” but “it can’t replace human creativity or human strategic thinking” Robinson stresses.

The beginning of the end?

That’s difficult to deny. But others believe AI will swallow more agency lunch than expected.

In June, it emerged Facebook, Instagram and Whatsapp owner Meta was working on AI tools for brands to create and target ad campaigns, to be released by the end of next year. The share price of WPP, Havas and Publicis fell in response. Then this week, Google unveiled Pomelli, an experimental programme with which SMEs can input their website address and generate entire ad campaigns.

Humans are still involved in conceiving overarching creative concepts, of course. Agencies need to focus their efforts here, says Fergus McCallum, CEO of TBWA\MCR, which has worked with Goodfella’s and Soreen.

“As more retail platforms adopt generative tools, agencies need to focus on what AI can’t replicate: original thinking, cultural understanding and emotionally provocative storytelling. The risk isn’t that AI replaces agencies, it’s that we start mistaking its output for creativity,” McCallum says.

“The real power of advertising lies in ideas that connect – something that can’t be generated from a brand kit,” he adds.

But could that be wishful thinking? What’s stopping AI from mastering that too?

“While Tesco’s AI creator itself won’t bring about the end of the average agency, the next 20 or 50 – or 500 – brands who do the same will,” argues Roy Murphy, co-founder of AI consultancy G3NR8.

“Create, test and iterate campaigns in seconds – check. Ensure brands ask what the hell they are paying the same fee to their agencies for – check. ‘AI will never replace our creativity’ avoidance from agencies while their business slowly dies – check,” he adds.

“The agency world has 16 months left. Maybe less. Agencies that don’t move with AI will die. Tesco is the latest brand owner to unalive another swathe.”