It’s a basic but perplexing question. An ad agency is whose agent? The media owner’s or advertiser’s, or both? Many ad men will say an agency is paid a commission on ad spends by the media owner, even if the actual?money comes from the advertiser. So, by that billing process at least, the agency has traditionally been the media owner’s agent. At boardroom presentations, though, the agency will present itself as the advertiser’s agent; as the holistic brand custodian that advises clients on brand strategy.
Hence, in any dispute involving the ad agency, the advertiser and the media owner/broadcaster, you’ll often find the agency and the advertiser in the same camp. A telling example is the ongoing face-off involving broadcasters versus advertisers and ad agencies over broadcasters’ new surcharges and payment systems. The former have clearly found a common grievance and joined forces.
Media observers say that if ad agencies are now at risk of being disintermediated by media owners (whereby their fees or commissions will be paid directly by advertisers), it’s because they’ve usually positioned themselves as the advertiser’s agent. Some media owners are saying: “Why should I pay you (the agency) commission? Let it come directly from the advertisers since you are more their emissary.”
Ad agencies, however, say they are more than just middlemen; they offer value-added thinking to brand owners and cannot be cut off from the chain so easily. Actually, it’s only business acumen that makes ad men position themselves as agents of the advertiser. Folks across industries are getting into the ad business, particularly the online ad space. Consultants have also been talking brand strategy, and they enjoy much more clout with advertisers than ad men. These days, every global technology and telecom major, from a Google Inc. and Microsoft Corp. to a Nokia Inc., is getting into this space to offer sharp ad serving, targeting, content solutions, etc.
To safeguard their business, ad agencies would naturally seek to get closer to their clients. They’re also changing their self-definition; some are consultants, others are communications and digital specialists, and yet others are entertainment or software companies. So, whose agent is the ad agency really, in the middle of all this? Well, you’ve got me there.
Marion Arathoon is Mint’s advertising editor.
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