How an Agency Makes Money Advertising
T. J., please don’t fire me…
By Lindsay Smith
The cost of media advertising seems subjective, and how an agency profits from coordinating ad buys is even more of a mystery. Allow me to lay it all on the table…
Advertising costs are subject to the ebbs and flows of the economy, circulation numbers and time of the year. More factors that affect the cost of advertising include paper quality, number of pages, demographic of readers, number of other advertisers, political elections, and housing market slumps. As 2008 will be a presidential campaign year, candidates will buy up a bulk of T.V. advertising space and thereby creating a supply and demand effect that will increase rates for other advertisers.
A large misconception about using an agency to facilitate advertising buys is that we add a middleman fee. You will find that ad rates are typically accessible on the publication’s website, and in most cases are the exact same, if not more than, the rate quoted by an agency. Agencies are privy to special deals and incentives that individual advertisers are not. Publications, such as the Business Journal or radio stations such as WOAI typically charge an agency 15% less than what they would charge a non-advertising business. Why? An agency, like us (Connolly & Company), delivers media business from multiple companies and is in-turn offered a “bulk discount”. We then bill an advertiser the retail amount and make our profit from the 15%.
So you may be thinking, “wouldn’t that encourage an agency to show favoritism for a particular media?” The answer is no, because the bulk rate is not contingent on how many companies we bring to a particular media. When we strategize the appropriate publication or radio station for your company, we customize our recommendations on an individual basis based on your industry and target market.
Agencies also have some leverage when negotiating special deals for our clients. Media representatives are often commissioned and they like not having to chase the new business. Agency account executives are already informed about size specifications, deadlines, bleeds, design format, etc. so reps don’t have to explain the difference between “column inches” and “real inches” for the zillionth time.
We have a symbiotic relationship with media. We can call media’s attention to positive news events for our clients by pitching a story that is spun in our favor. As our client, we also ensure that your company is invited to events hosted by publications and placed in lists such as the San Antonio Business Journal Top 25 Commercial Real Estates Firms. This is an example of how public relations, marketing and advertising are all inter-related.
When deciding whether or not to use an agency or handle negotiating ad buys in-house, consider the employee energy you are saving by outsourcing this responsibility. You are ensuring that you receive the best possible deals and that the agency account executive will get you the best placement in the publication. And if doesn’t cost you anything extra, why not? You wouldn’t walk into a courtroom without a lawyer…so don’t negotiate media without us.
