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Are ad agencies holding back a flood of ad dollars to the Internet at their clients’ expense? 12/27/07

Posted by Steve Boriss in AdAgencies, Monetize.
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The conventional financial relationship between ad agencies and their clients was destined to fail eventually, and we may now be living in those end times. If ad agencies were thought to be like any other service business, advertisers would simply pay them an hourly rate. But the quality of an agency’s work can potentially have a super-sized impact on a business. So, as the thinking goes, they need to be inspired, to feel like they are part of the growth of a business, and to be rewarded based on the growth of the business. Great idea, but that presents two not-so-little problems. First, it has never really been possible to isolate and measure the real financial impact of an ad agency’s work — so, agencies have typically been given a percent of a clients’ ad spending instead. Which creates the second problem. What incentive does an agency have to propose more productive plans for their clients’ ad spending if these threaten to reduce both total ad expenditures and this cozy business model — for instance, a plan that shifts funds to lower cost, more highly targeted, and more measurable ads on the Internet? Not much.

So when you read in the NY Post and at BuzzMachine that advertisers are paying for more and more network TV spots, at higher and higher rates, because of fewer and fewer network viewers, using plans developed by their ad agencies, it makes one wonder. Just whose side are ad agencies on? How long will their clients put-up with it? And, will the monetization of the web continue to be a problem once their clients have had enough?

Comments»

1. Joe Zekas - 12/27/07

Ad agencies, in my experience, are a major barrier to progress.

They can’t figure out how to make money on the Internet. They fear it and are resolute in their determination not to learn anything about it.

Their clients have had enough, but are in the same state as the agencies – they don’t know what to do about it. I haven’t seen anyone outside of the agencies providing a clear and coherent alternative strategy in the real estate space thath I do business in.

2. sam - 12/31/07

Ad agencies can only be just as good as you brief them.

If some corporations write blank checks for marketing without adding in performance based remuneration clauses (very easy to do when it comes to internet marketing), then who can blame the agencies for taking it the easy way?


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