AMENIA, NY – The advertising industry has spent years building increasingly sophisticated technology to move money, data and impressions around the internet. Unfortunately, much of that technology now appears to have the plumbing efficiency of a country house built during the Coolidge administration.

Joe Root, co-founder and chief executive of advertising technology company Permutive, said agencies are rapidly rebuilding their operations around artificial intelligence. The next challenge is connecting those systems to publishers without losing most of the audience along the way.

“We’re seeing the agency operating system evolve very quickly right now,” Root told Beet.TV contributor David Kaplan during an interview at the Beet Retreat Berkshires.

AI enters the agency workflow

Root said agencies have moved quickly to embed AI throughout their workflows while strengthening the data foundations beneath them.

The systems can combine data owned by an agency or advertiser with information obtained from outside partners. Agencies are then using that foundation to automate work, improve efficiency and guide media spending.

The problem comes when they try to activate those carefully assembled assets across the open internet.

“A lot of the pipes in adtech are broken and not necessarily helping them achieve that long-term goal,” Root said.

Publishers have also created data systems and AI-powered workflows. However, the agency and publisher systems often remain isolated from each other. Everyone has built an impressive machine, but nobody remembered to agree on the shape of the plug.

“The question is how do we break those operating systems out of their silos and get them into the open internet and really achieving their potential?” Root said.

Most inventory vanishes into the pipes

Kaplan noted that Permutive sits between agencies, publishers and technology platforms. He asked Root what was specifically broken in the way agencies operate.

Root pointed first to the programmatic connections between agencies and publishers. Demand-side platforms have received far more impressions as supply-side platforms have multiplied. Processing all those opportunities became costly, so platforms began asking suppliers to send only the inventory most likely to attract a bid.

The trouble is that everyone tends to select the same inventory, particularly impressions tied to a cookie or another identifier.

“Everyone sends the same 20% of inventory through the pipes, which collapses reach, drives prices up, brings performance down,” Root said.

That concentration means advertisers compete for a limited pool of recognizable consumers while much of the available audience remains unseen. It is a bit like opening a restaurant with 100 tables, seating customers at 20 of them and then wondering why reservations are so competitive.

Addressability loses its address

A second problem is the decline of online identifiers. Root said nearly every consumer could be addressed through an ID five or six years ago. Privacy changes from Apple, government regulation and the growth of channels without conventional identifiers have sharply reduced that pool.

“Right now, about 30% of consumers have an ID, but 70% are no longer addressable,” Root said.

Platforms such as Meta rebuilt their advertising systems using signals from their own supply, Root said. The open internet has not completed the same transition.

That makes closer cooperation between agencies and publishers increasingly important. Publishers can see signals across their audiences that may not survive the trip through the conventional programmatic supply chain.

Agencies therefore need technology that lets them work more directly with publishers, make decisions closer to the source and coordinate campaigns across multiple media owners.

Too many toll collectors

Kaplan asked how Permutive can help simplify agency technology without sacrificing capability.

Root said agency systems typically combine homegrown tools with outsourced services. At the same time, pressure on agency-of-record fees has pushed agencies to make more money from the media budgets they manage.

That has forced them to examine how much advertiser spending actually reaches a publisher.

“A dollar goes in, 30, 40 cents makes its way over to the publisher on the other side,” Root said, referring to findings about supply-chain costs.

Agencies increasingly want to establish more direct connections with publishers and reduce the number of intermediaries taking a nibble from each advertising dollar. In adtech, even the crumbs apparently employ consultants.

Agents may make direct deals scalable

Direct transactions historically required requests for proposals, long email exchanges and data passed around in CSV files. Root described the process as slow, difficult and complicated compared with buying through a walled garden.

AI agents could change that calculation by handling more of the transaction automatically.

“Agents really change what’s possible here,” Root said.

Agentic technology could help agencies transact directly with publishers while still operating at programmatic scale. It may also allow them to use publisher signals without depending on the identifiers that once powered much of digital advertising.

Root sees two trends coming together: deeper connections between agencies and publishers, and AI systems capable of coordinating those relationships.

“Agentic effectively allows that direct transaction to happen in a much more scalable manner,” he said.

If it works, the open internet may finally get smarter pipes. At the very least, fewer advertising dollars should disappear mysteriously between the faucet and the publisher.