Agencies are going AI-native. Are brands buying in?

For the past year, India's advertising industry has developed a new favourite adverb. Every agency deck is suddenly AI-powered, AI-first, or AI-native. Somewhere between the capabilities slide and the obligatory Cannes Lions case study, artificial intelligence has become a mandatory credential.

The problem is that almost nobody seems to agree on what “AI-native” actually means.

For some agencies, it means integrating generative AI into creative and analytics workflows. For others, it means fundamentally redesigning how strategy, media, planning, execution, and optimisation work together. And for brands increasingly inundated with AI-heavy pitches, the question is becoming less about whether agencies use AI and more about whether it actually improves outcomes.

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That distinction may define the next phase of India's AI transition in advertising. Everyone is using AI. Few are rebuilding around it. If there is one point of consensus among agency leaders, it is that most of the industry is still in the early stages of transformation.

“Honestly, most are still layering,” said Prashant Puri, CEO and Co-Founder of AdLift. “For example, you will see a new generative tool adopted in the creative team, or a better analytics dashboard rolled out, but the underlying structure, the way a brief travels from client to output, has not changed much.”

According to Puri, the parts of marketing seeing the deepest structural impact today are analytics, media buying, and increasingly planning, where AI can combine audience signals, market context, and cultural trends in near real time. However, he believes the industry's biggest challenge is not technological but organisational.

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“The real constraint is commercial,” he said. “Clients still expect traditional account structures and familiar ways of working because the industry is still largely tied to billable hours and headcount.”

That creates an awkward contradiction. Agencies are under pressure to become faster and more efficient through AI, but many of the industry's commercial models continue to reward the very structures AI is designed to streamline.

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Others see a similar pattern.

Kruthika Ravindran, Director at TheSmallBigIdea, believes most agencies remain in what she describes as an “AI-assisted” phase rather than a truly AI-native one. While AI tools are increasingly being embedded into existing workflows, she argues that few organisations have fundamentally rethought how teams collaborate or how work is delivered in an AI-first environment.

Bipeen Nadgauda, Co-founder and Head of Technology at AGENCY09, echoes that view. According to him, many agencies are still deploying AI inside existing structures to improve efficiency while keeping the broader operating model largely unchanged. The more advanced firms, he said, are rebuilding around shared intelligence layers and automation frameworks that connect strategy, execution, and optimisation into a single workflow.

The result is an industry where almost everyone claims to be transforming, but very few agree on what transformation actually looks like. Interestingly, marketers themselves appear less interested in AI labels than agencies might hope.

“Increasingly, yes, but rarely in the ways vendors and partners would like to believe,” said Megha Agarwal, Chief Marketing Officer at Table Space. “Nobody in a marketing leadership meeting at a Fortune 500 company is putting 'AI-native' on a scorecard and scoring agencies out of ten.”

Instead, she says brands are asking a much simpler set of questions: “Are you faster than us? Do you know things before we ask? Are your recommendations getting sharper or are they plateauing?”

For Agarwal, capability today is inseparable from how intelligently AI has been integrated into actual execution rather than how prominently it features in presentations. “There is a meaningful difference between an agency that uses AI tools and a team that has rebuilt how it works around AI as a core operating assumption,” she said.

That distinction may be where the market is ultimately headed.

As AI adoption matures, the novelty factor is fading. Brands increasingly expect agencies and platforms to use AI. The differentiator is shifting toward whether those tools produce measurable improvements in speed, intelligence, optimisation, and business outcomes.

Agarwal argues that the partners likely to become indispensable over the next few years will not necessarily be the loudest advocates of AI. Instead, they will be the ones that consistently deliver sharper context, faster turnarounds, and recommendations that demonstrate a deeper understanding of specific business challenges.

In other words, brands may be evaluating AI capability without explicitly calling it that.

For Nayab Nazir, Marketing Lead at Muzz, discussions around AI-native agencies can sometimes overstate the role AI plays in partner selection. “When we're looking at an agency, we're looking at whether they understand our community, whether their work has cultural depth, whether they've done something that actually moved people,” she said. “I haven't sat in a room and asked an agency what their AI stack looks like.”

That does not mean AI capabilities are irrelevant. Rather, they matter differently than many agencies assume.

“If an agency is still working the same way they were five years ago and hasn't figured out where AI fits into their workflow, that tells you something about how they think,” Nazir said. “Adaptability matters. But AI for the sake of AI, that's not something I'm evaluating anyone on.”

Her comments highlight an emerging tension within the industry. While agencies increasingly market AI as a differentiator, brands may ultimately judge them on more traditional metrics: strategic thinking, cultural understanding, creativity, responsiveness, and business impact.

AI may improve those capabilities. It does not automatically replace them.

That creates a growing risk of what might be called capability theatre, where agencies showcase tools, models, and platforms without demonstrating how those capabilities translate into better work or better outcomes.

The future belongs to workflows, not tools. Despite differing views on how agencies should position their AI capabilities, there is broad agreement that AI's role will continue to expand.

Jeet Chandan, Group Managing Director at BizDateUp, believes agencies will increasingly compete on speed, predictive capabilities, experimentation cycles, and AI-integrated workflows rather than on relationships alone. “The real differentiator is whether AI is embedded into the workflow itself or just layered on top for presentations,” he said.

It is a distinction that surfaced repeatedly throughout conversations for this story.

For all the industry's enthusiasm around AI, the real divide may not ultimately be between agencies that use AI and agencies that do not. That battle is effectively over.

The more consequential divide is emerging between organisations that have integrated AI into the way they work and those that have merely integrated AI into the way they describe themselves. As brands become more familiar with AI and more demanding about outcomes, that difference may become increasingly difficult to hide.