What Does A K-Shaped Economy Mean For Advertising?

If you read the news every day, you probably experience one of two reactions.  Most of the time, you feel anxiety and some level of stress by seeing what is going on and worrying about the implications it has on your day-to-day.  Sometimes you switch your thinking and see some measure of opportunity.  Let’s focus on the opportunity.  That feels markedly better to me.

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General macroeconomic conditions have been referencing a concept called a K-shaped economy as of late.  A K-Shaped Economy refers to an economic situation in which those with means and wealth are thriving, while the middle and lower classes are struggling more and, in many cases, having a more difficult time staying afloat, much less thriving.  View the letter “K,” and you understand that the summation is an increased gap between the haves and the have-nots, just the arms of the letter itself.  The term is most often discussed in the context of the US and global economies, but I also see it applying to the advertising industry.  Allow me to explain.

If you read about the ad industry the way I do, you see that AI is fast becoming a tool for agencies, publishers, and brands.  Advertisers can more efficiently and more quickly develop and execute strategies than they could even just a few short months ago.  Many companies are investing heavily in AI infrastructure and leveraging commercially available LLMs to get the job done.  If your company has access to these tools, you are doing well.  If you are struggling to use them, you are not doing as well. Some large agencies are being quickly supplanted by smaller, more nimble agencies that rely heavily on technology rather than on pure person-oriented hours.  Thirdly, since there is so much concern about those macro-economic concerns, there is a shift towards the “tried and true” platforms and players, and those who offer a variety of solutions are seeing the continued lion’s share of the dollars allocated to them, making it more difficult for innovation to break through.  It's not to say that innovation isn’t breaking out, but only the best of the best truly are succeeding.

It comes down to this.  If you have the technology, the money, and the clients, you are thriving.  If you are struggling with 1 of these 3, you are facing headwinds that may make it difficult to succeed.  In that lies the opportunity for you and your business.

This may not be entirely new, but it appears more pronounced than in the past.  In previous years, specifically during my career (dating back to 1995), times of economic challenge were when innovation thrived.  1995 was a hard time to get a job, but the internet economy was beginning to break out, creating new opportunities.  In 2000, the dotcom bubble burst, leading to layoffs, but along came Google and paid search, which bolstered agency business.  2008.  2019.  These years had their own challenges, but innovation stemmed from both.  It could be more aligned with my view of where I was and what there was to risk during those periods, but innovation came naturally to me and the people I worked with, and the market quickly and more easily embraced those innovations.  

In this economy, innovation is still highly valued, but it comes from access to the three elements: technology, money, and clients.  If you have these, you can succeed.  If you have these, you are on the growth side of the K shape.  If you don’t, you are struggling. This is where you harness opportunity.

If you want to succeed in today’s advertising market, you have to be thinking about those three areas: technology, money, and clients.

TECHNOLOGY

AI is available to anyone.  It doesn’t really cost much, but you have to set aside time to use it.  It can be activated in any aspect of your business, and you must set aside the time to determine how.  It is very easy to get caught up in day-to-day deliverables and do so in the “old way” that worked, but if you want to thrive, you need to invest time in rethinking how you work and leveraging the tools available to you.

AI should be used to question the way you write code.  Develop products.  Go to market.  You can create marketing concepts, creative, and even media plans using AI.  You can use AI for project management and performance reporting.  You should question everything and ask, “How can we leverage AI to improve these functions?”  Some of the answers will surprise you.

MONEY

If you are already generating revenue, you need to invest in marketing and advertising to sustain your growth.  If you don't have revenue, you need to raise seed funding to light the match and start the proverbial fire.  Money is required in a K-shaped economy because clients are harder to find.  They are more focused on the partners who work, and you need to bust through the noise and get them to pay attention.  

CLIENTS

You are in one of 2 buckets.  You are either an existing company with clients and want to expand with them, or a new company looking to gain new clients.  If you have the clients, you should be doubling down and bringing new ideas to them.  Explore the latest ideas at no cost.  You create more stickiness in the relationship, and that stickiness converts to revenue over time.  If you don't have clients, you should leverage AI to acquire customers.  You can use it to do research, develop the ICP, craft GTM plans, execute email and paid search outreach, set up appointment scheduling, and more.  You need to work your network, attend events, find the people who would be interested in what you do, and find ways to break through to them.  You may be doing pilots at no cost, but with clear actions that stem from successful pilots.  You need to do whatever it takes to get those clients moving in the right direction, and you can figure out how to monetize them later.  It's a scrappier way of operating and one that makes some companies nervous, but it pays off in the end.

Much of what I am calling out here is not truly news, but being “Captain Obvious” is essential at the beginning of the year.  This is not like previous years, where the economy was set up for immediate success.  There is more friction and more challenge in a K-shaped economy. The haves are set up for more success.  The have-nots will have a more difficult road to success, but they can still get there.  You just need to be upfront, open, and honest about what you need to get there.  In a K-shaped economy, you must stand out, and marketing is the tool that can help you.  

Good luck this year!