Why the Marketing Agency (SMMA) Model is Dead
Why the Marketing Agency (SMMA) Model is Dead
For 5 years, SMMA (Social Media Marketing Agency) was the El Dorado of digital entrepreneurs.
The pitch was seductive: “Launch your agency, sell social media and advertising management services to local businesses, charge $2000/month per client, scale to 10 clients = $20,000/month.”
Thousands of young entrepreneurs jumped in. Hundreds of courses were sold on this model.
This model is collapsing.
Why? Because AI has destroyed the value of the human intermediary.
The Golden Age of SMMA (2018-2023)
Why It Worked
SMMA worked because there was a skills arbitrage.
Local businesses (restaurants, dentists, plumbers):
- Didn’t know how to use Facebook Ads
- Didn’t understand social media
- Didn’t have time to learn
SMMA agencies:
- Knew (somewhat) how to use the tools
- Had time to manage campaigns
- Could charge a premium for this rare skill
The Business Model
The economic model was simple:
Client side: Charge $1500-3000/month to “manage” their social and ads
Agency side:
- 2-4h of actual work per client per month
- Using tools at $100-300/month
- 70-80% margin
Scaling:
- Hire “media buyers” at $2000/month
- Have them manage 10 clients each
- Keep the difference
It was classic labor arbitrage.
The Equation of Death
This equation has changed radically.
What an SMMA Agency Actually Does
Let’s be honest about what most agencies really do:
- Research: Finding audiences and keywords
- Creation: Generating visuals and copy
- Configuration: Setting up campaigns
- Optimization: Adjusting based on data
- Reporting: Creating reports for clients
What AI Does Now
Each of these tasks can be automated:
- Research: AI analyzes audiences and suggests best targets
- Creation: AI generates visuals (Midjourney) and copy (GPT/Claude)
- Configuration: AI can configure via API
- Optimization: AI analyzes and adjusts in real-time
- Reporting: AI generates automatic dashboards
The Brutal Math
Traditional agency:
- Charges: $2000/month
- Human work: 4h/month
- Human cost: ~$50/h = $200
- Tools: $50/month per client
- Margin: ~$1750
AI agent in an AEP:
- API cost: ~$30-50/month for the same work
- Human work: 30 min of supervision
- Quality: Often superior (more tests, more iterations)
The price gap is 40x.
No business model survives a 40x productivity gap.
The Signs of Collapse
Signal 1: Price War
SMMA agencies are engaged in a desperate price war.
What used to bill at $2500/month now negotiates at $800. Margins are collapsing. Agencies survive on volume, not value.
Signal 2: Clients Are Educating Themselves
Local businesses are starting to:
- Use ChatGPT themselves for copy
- Discover Canva with AI for visuals
- Learn Facebook Ads basics on YouTube
The skill gap that justified the agency is shrinking.
Signal 3: Platforms Are Integrating AI
Meta, Google, TikTok are integrating AI directly into their ad tools:
- Automatic creation of variations
- Automatic audience optimization
- Suggested copy generation
The platforms are cannibalizing agency work.
Signal 4: Results Are Stagnating
Many SMMA agencies don’t really produce results. They charge to “manage” without really performing. Clients are realizing this and leaving.
The Death of the Human Intermediary
SMMA is a particular case of a broader phenomenon:
The death of the human intermediary.
Everywhere a human served as a bridge between a tool and a client, AI is removing the need for that bridge.
Examples of Endangered Intermediaries
- Real estate agents: Between seller and buyer
- Brokers: Between client and banks
- Translators: Between two languages
- Basic accountants: Between business and taxes
- Generic consultants: Between a problem and a standard solution
All these jobs relied on a skill or access arbitrage.
AI democratizes access and skill.
Becoming an “AEP Agency”
The only way for an agency to survive is to change models.
The Old Model (Doomed)
Selling human time
“I’ll manage your ads for X$/month”
Problems:
- Competing with AI
- Collapsing margins
- Scaling limited by humans
The New Model (Viable)
Selling autonomous systems
“I’ll install your autonomous advertising AES for $X + $Y/month maintenance”
Advantages:
- Higher perceived value (asset vs service)
- Preserved margins (architecture expertise)
- Scaling through systems, not hours
The Concrete Transition
Step 1: Master the AEP Learn to build automated advertising systems, not just “manage” campaigns.
Step 2: Repackage the Offer Instead of “monthly management”, sell “system installation + training + support”.
Step 3: Target Differently Small local businesses can’t pay for complex systems. Target SMBs with more budget and more digital maturity.
Step 4: Create Templates Develop “Blueprints” by sector (restaurant, dentist, lawyer) that you can deploy quickly.
The Architect Doesn’t Sell Fish
Here’s the key metaphor:
The traditional SMMA agency sells fish. “Pay me every month, and I’ll bring you customers.”
If the agency stops, the fish stops. The client is dependent. The agency is a slave to its time.
The AEP Agency sells the robotic fishing rod. “Pay me to build your system, then it fishes for you.”
Once installed, the system runs. The client is autonomous. The agency can move to the next client.
Advantages for the Client
- Ownership of the system (asset, not expense)
- Independence from the agency
- Predictable long-term cost
- Understanding of what’s happening
Advantages for the Agency
- Higher initial price (perceived value of an asset)
- Recurring revenue on maintenance (not on work)
- Scaling through systems, not hours
- Satisfied clients who refer
The Skills of the AEP Agency
To succeed in this transition, required skills change.
Obsolete Skills
- Knowing how to “manage” campaigns manually
- Creating content “by hand”
- Spending time on client accounts
- Manual reporting
Critical Skills
- Systems architecture: Designing automated flows
- Prompt engineering: Extracting the best from AI
- API integration: Connecting tools together
- Strategic consulting: Helping clients define their goals
- Training: Making clients autonomous on their system
The New Profile
The SMMA agency of the future is not a “marketing agency”.
It’s a consulting firm in economic architecture specialized in customer acquisition.
The Message to SMMA Agencies
If you have an SMMA agency, here’s the brutal truth:
Option 1: Deny and Die
Continue as before. Watch your margins collapse. Lose clients one by one. Close in 2-3 years.
Option 2: Pivot and Prosper
Learn Economic Architecture. Transform your offer. Become a systems builder. Multiply your value.
The Timing
The pivot window is open now.
In 2 years, clients will know what an AEP is. They’ll go directly to systems builders. “Managers” will be completely obsolete.
Pivot now, while you still have a client base and reputation to convert.
Conclusion
The SMMA model is not “struggling”. It is structurally dead.
AI has destroyed the skill arbitrage that justified it.
The only path to survival is transformation:
From time seller to systems builder. From manager to Architect. From intermediary to asset creator.
The Architect doesn’t sell fish. They sell the robotic fishing rod.
Make the pivot. Now.