The $ Reset and Ad Revenue Restructuring

In the last few months, the geopolitical chessboard of nations has seen a lot of action. We have started hearing and seeing intense media chatter around de-dollarization as well as a non-West-led push for diversified, gold-backed currencies. With BRICS nations (Brazil, Russia, India, China, and South Africa) now exploring the possibility of a gold-backed unified currency (UNIT?) in a medium time horizon or an mbridge enabled payments system to skirt SWIFT, the global economic order stands on the precipice of monumental change. These shifts hold significant ramifications—not only for national economies but also for several global brands, ad agencies, and their resultant revenue and marketing strategies.

Gold sits at the heart of these impending shifts like it always did. It has always served as a hedge against economic instability and inflation. And over the last decade, Gold prices have rallied, rising from approximately $1,400 per ounce in 2013 to around $2,000 per ounce in 2023. This heady increase has been underpinned by inflation, geopolitical tensions, and currency fluctuations among others. And now, with the prospect of a potential BRICS-backed currency rising up the probability charts, another layer of complexity has been added, driving demand for gold even as central banks across these nations prepare to collateralize a new reserve currency. In fact, we are seeing this right now, with several BRICS countries including India recalling its gold reserves from the UK!

Therefore, to build an argument that connects the re-center staging of Gold and the subsequent dollar devaluation to future ad revenue for creative + media agency networks, let's explore some mathematical and economic foundations that possibly underpin these shifts. Through an empirical predictive approach, let's take a punt on how we think gold’s value might evolve, how de-dollarization could impact global businesses, and, ultimately, how advertising and media agencies could possibly re-adapt to play in this potential VUCA++ world!

What if we constituted the following exponential model to address the growth of Gold prices...

Here,

• P(t) is the predicted price of gold at time t,
• P0 represents the starting price of gold,
• r is the annual growth rate, and
• t is the number of years from the starting point.

For example, if the price of gold in 2013 was say, $1,200 per ounce and it reached $2,000 in 2023, we can determine the growth rate r over this 10-year period. Solving for r gives us approximately 0.051, or 5.1% annually. If we project this rate forward, we get the following predictions:

• 5 years from now (2028):

P(5)=1200×e(0.051×5)≈1,540?USD

10 years from now (2033):

P(10)=1200×e(0.051×10)≈2,000?USD

However, if a BRICS-backed currency takes off, increased demand for gold could accelerate this growth. By adding a demand factor δ (delta), we capture this scenario, refining our formula as:

P(t)=P0×e((r+δ)×t)

The factor, δ, reflects additional annual demand from BRICS countries, potentially raising the annual growth rate from 5.1% to 7.1% or higher as demand intensifies.

HOW DE-DOLLARIZATION WILL IMPACT GLOBAL BRANDS:

In a dollar devaluation war-gamed scenario, BRICS nations could reduce their reliance on the U.S. dollar in international trade, especially for commodity purchases. This is highly possible given that Donald Trump, in a run-up to the US elections, has threatened slapping 100% tariff on imports from non-dollar compliant nations. This may not be an economic sanction but it is an abridged, punitive monetary policy that is likely to elicit counter-responses from the US dollar non-compliant 'block'. If a BRICS currency does come up, leading to a devaluation of the US dollar, global brands will need to consider the following...

1. Cost Volatility: As raw material sourcing is more skewed to the Global South, trading in devaluing dollars could negatively impact profitability.
2. Currency Risks in Foreign Markets: Global brands will face higher currency risks as countries adopt the BRICS currency, impacting revenue stability in dollar-denominated markets.
3. Supply Chain Recalibration: With the potential for diversified reserves and currencies, global brands will need agile supply chain strategies, possibly redirecting efforts toward BRICS nations, where currency fluctuations are likely to be less volatile.

WHAT COULD THIS MEAN FOR ADVERTISING AND MEDIA AGENCIES?

For advertising and media agency networks that are AORs for global brands, reduced ad budgets will get normalized, especially in Western markets. This can be explained by the following exponential decay formula that projects/predicts declining revenue...

(t)=R0×e?(α+β+γ)×t

Here,

• R(t) represents agency revenue at time t,
• R0 is initial revenue,
• α or Alpha is the annual revenue decay due to shifts in USD spending,
• β or Beta is the rate of reduction as global brands are forced to adopt BRICS currency
• γ or Gamma represents the indirect impact of rising gold prices on brand budgets.

To cite a conservative example of the above model, let's assume that the HQ of a big global agency network pulls in US$ 100 million in revenue. Let us also assume that annual decay in a post UNIT geoeconomics scenario stands at 3%, currency shift impact is 2% and rising gold prices impact revenue for 1%.

The projected revenue for these assumptions, after 5 years would be...

R(5)=100×e?(0.03+0.02+0.01)×5≈74.1?million?USD

That is a massive 25% drop in revenue, even with relatively modest decay and reductions.

If I add inflation to this model through some form of an adjustment factor, this 74 million USD will shrink even further.

To manage this revenue damping, the following actions from agency networks are likely...

1. Workforce reductions
2. Higher ad revenue contribution pressure on BRICS markets
3. Institutionalization of freelancing or crowdsourcing models

COULD AI AS AN IMMUTABLE ENGINE ACROSS THE ADVERTISING/MEDIA PROCESS SAVE THE DAY?

To counter revenue declines, agencies could turn to AI-driven tools and automation to optimize costs and enhance campaign efficiency. By incorporating an AI maturity factor δAI that grows as AI capabilities mature, we can model revenue with AI in the following manner...

RAI(t)=R0×e?(α+β+γ?δAI(t))×t

Here,

δAI(t) increases over time as agencies adopt AI more fully. This AI maturity curve helps reduce the effective decay rate, offering a stabilizing effect on revenue.

Consolidation, Boutique Agencies, and the Future of Advertising

As economic pressures mount, the future of advertising may see more M&As among global networks and the further rise of boutique agencies in emerging BRICS markets like India and Brazil. Here’s how these trends may unfold:

1. More M&As: Global networks may acquire or merge with competitors to consolidate resources, reduce redundancies, and gain footholds in high-growth markets. Acquisitions of AI-driven agencies can also provide critical technology to enhance efficiency and analytics.
2. Boutique, Boutique everywhere in BRICS Markets: As brands pivot towards BRICS markets, local boutique agencies with deep cultural expertise may thrive, providing niche solutions that align closely with regional consumer behaviors.
3. Creative agencies masquerade as semi-tech: Agencies might adopt hybrid models, offering data-driven, full-service solutions where AI plays a central role. This adaptability will be key to surviving economic turbulence.
4. More of the semi-tech play: Partnerships and Collaborations: Agencies may turn to partnerships with tech firms, data analytics companies, or other specialized agencies to fill gaps without heavy investments. This allows them to remain competitive while managing costs.