AI killed the time sheet

The billable hour problem

Last week, I showed you the two-year dominoes.

The five categories tipping from early adopter to early majority. Server-side tracking, answer engine optimization, retail media, agentic B2B, machine-readable everything.

But here's what I didn't say.

None of that matters if your business model doesn't work anymore.

And the research is showing something pretty clear.

The way agencies make money is broken.

The traditional agency model is time and materials. 

You bill for hours. A junior person costs X per hour, a senior person costs Y per hour, you stack the hours, you send the invoice.

That model assumes human labor is the input.

But AI just automated most of the billable work.

Copywriting? AI does it in minutes instead of hours. Coding? Same thing. Reporting? Automated. Campaign setup? Automated. Creative variations? Automated.

All the low-level tasks that used to create billable hours - they're gone.

You can't bill a client for 40 hours of work when the AI did it in 4.

So what do you do?

You can try to hide it. Keep billing the same rates, pocket the efficiency gain. But that only works until the client realizes they're paying for work that doesn't take that long anymore.

Or you can be honest about it. Which means your revenue drops 80% overnight.

Neither option is good.

The infrastructure problem makes it worse

Here's where it gets interesting.

The research is also showing that the old tracking infrastructure is obsolete.

Browser restrictions, privacy laws, iOS settings - they're killing traditional pixels. Brands are losing 30-50% of their conversion data.

Which means they need new infrastructure. Server-side tracking. Data clean rooms. Consent architecture.

That's complex work. High-value work. The kind of thing you SHOULD be able to charge for.

But if you're still billing by the hour, you're incentivized to make it take longer... Which is the opposite of what clients want.

They want it done fast. They want it done right. They don't care how many hours it took.

The speed problem makes it worse

And then there's the speed issue.

Consumer behavior is shifting. The research calls it "Treatonomics" - people want immediate value, not long-term promises.

Which means brands need to move faster. Detect a trend in the morning, launch creative by afternoon, capture demand by evening.

Human workflows can't do that.

You need AI that can monitor signals, generate assets, and spin out campaigns without human intervention.

But again - if you build that system, you're automating yourself out of billable hours.

The better you get at speed, the less money you make under the old model.

The real problem

So here's what's actually happening.

The market is demanding three things:

• Better infrastructure (server-side, clean rooms, compliance)

• Faster execution (agentic systems, real-time activation)

• Lower costs (because AI does the work)

All three of those things break the billable hour model.

You can't charge for hours when the work is automated.

You can't charge for speed when speed means LESS human time.

You can't charge for infrastructure when infrastructure eliminates ongoing labor.

The old model doesn't work.

Forrester's research says agencies have to pivot to solution-based or outcome-based pricing. You can't sell hours anymore. You have to productize your intellectual property.

But most agencies don't know how to do that.

They're still trying to fit the new capabilities into the old business model. And it's not working.

I'm breaking this down live

This is exactly what I'm covering in my January 22nd workshop.

Not just what's changing in the market. But what does it mean for your specific business model? How do you actually make the transition from selling hours to selling systems?

Registration opens next week. I'll send you the link.

But I wanted you to see the problem first.

Because the two-year dominoes are falling. The market is tipping into early majority (where the real money is made).

And if your business model can't capture the value you're creating, none of it matters.

The research is clear.

The question is what you do about it?

We’ll discuss that next week.

To Your AI-First Success,

Jeff Sauer

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