Читать книгу Media Selling - Warner Charles Dudley - Страница 73

Advertising agencies came into existence in the 1880s when they sprang up as sales representatives for newspapers and magazines. As sales representatives for the media, they kept a 15 percent commission on the amount of money advertisers spent with them in the media they represented. Thus, an advertiser might spend $1,000 for ads in a magazine and the agencies would keep $150 and give $850 to the magazine. As time went on, the agencies got close to their advertisers and began to create advertising for them and to advise where to place it. The agencies maintained the practice of keeping 15 percent of the amount the advertisers spent in the media through the late 1980s, when the agency business began to change as more and more independent agencies were purchased by large agency holding companies such as WPP, Omnicom, Publicis, IPG, Havas, and Dentsu. As competition for large accounts intensified, the holding company agencies began to compete for business on price, or lower commissions and fees. The fierce competition among the holding company agencies accelerated a trend of decreasing commissions. This trend was acerbated by large advertisers that often turned over the negotiating of agency commissions and fees to their purchasing departments, which brought on the use of negotiated fees based on scope of work (SOW).

Agencies also make money by adding a 15 percent commission to the material, services, and production they purchase for a client, a practice that is referred to as grossing up a charge. For example, if an agency purchases $850 worth of photography for a client, it would gross it up 17.65 percent (or multiply $850 by 1.1765) and charge the client $1,000. (You may recall from basic high school algebra that you cannot take a 15 percent discount off the price of some product and then multiply the discounted price by 1.15 to get the original number; the two values will not be equal. For example, 15 percent less than 100 is 85, but 1.15 times 85 equals only 97.7.)