How Do Advertising Agencies Make Money?


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Mehreen Misbah Profile
Mehreen Misbah answered
The factor of monetary compensation is a very critical and crucial factor in the relationship between the client and the advertising agency. Generally advertising agencies derive their revenues as well as their products from two sources that are mutually exclusive, namely commissions and fees.

In the case of a commission, a certain percentage is decided between the advertising agency and the client, which the client is going to pay the client. This percentage is going to be a proportion of the media cost. At the end of the advertising campaign, the advertising agency is going to add its commission to the bill of the client along with the media charges of which the commission is a fixed proportion.

The alternative of the commission system of compensation is the fee system. Comparable to the means by which companies pay their lawyers and accountants, the client company and the advertising agency decide in advance about an hourly fee or rate. It could be a simple hourly fee that is to be divided amongst all departments or it could vary department by department. Of course the charges of travelling, out-of-pocket expenses are billed to the client company as well.

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