“You need to have creatives and media people thinking as a single team,” explains an ad agency executive in this recent Digiday post about an agency specializing in “creative” (copywriting and art direction) arguing it needs to move into media buying to be more effective.
This is not a new idea. Ad agencies used to earn a 15% commission on the media space/time they bought for advertisers, which was officially paid by publishers or broadcasters but actually deducted from their “billings” to clients. Under the commission system, ad agencies also provided clients with other services, such as market research and creative services, for no added fee. Media commissions were the primary form of revenue for ad agencies.
Ad agencies could offer more or fewer services, depending on clients’ needs, without having to bill the client directly for those services. If a client was happy with a campaign and increased its media buying, the agency directly benefited by earning more in commissions. The media commission system had the effect of cross-subsidizing the creative work, thus allowing for a certain amount of flexibility in how an agency allocated its creative resources.
All of this changed in the consolidations of the ad industry into holding companies during the 1980s-1990s. Clients believed that they could get lower prices for media if media buying were consolidated into a few oligopolistic specialist media agencies, separate from agencies providing the creative work. The traditional agencies began billing for creative services, often on a time basis. Ideally, clients use media and creative agencies from the same holding company, thus benefiting the holding company’s bottom line, but that does not always happen.
In my conversations with many different ad agency people recently, I asked about this split and how it affects creative agencies. Repeatedly, people at creative agencies told me how difficult it is for them to coordinate with the media buying agencies, especially when the creative execution depends on proper media buying, and how pressured they are to keep their billings for creative work low, resulting in tighter deadlines and greater demands from clients to justify their time expenditures.
As this Digiday article implies, it may be time for agencies to consider a return to the traditional commission system. The integration of media buying with creative services not only speeds up the process by centralizing it into one agency, it also “bak[es] media into everything,” an especially important consideration in a digital media environment where the platform and the content are harder and harder to tell apart. And most important, media buying commissions would provide agencies with a new (old) source of revenue.
For traditional “creative” agencies, vulnerable to client pressures to reduce their creative expenditures, this traditional business model might provide some advantages.