Ad Agencies Look To Charging Fees For Services

Advertising agencies are increasingly looking to charge fees for their services as commission-based revenue takes a tumble, according to a new report from ISBA.

ISBA, the representative body for UK advertisers, and the Advertising Research Consortium are set to launch their fourth ‘Paying for Advertising’ study, focusing on how the major advertisers are paying their creative and media agencies and managing their commercial relationships.

A major finding of the report is that the demise of commission is moving forward faster than at any other period, with fees increasingly becoming the favoured method of payment.

Between 1997 and 2006, the uptake in fees has increased year on year and has risen from 57% to 85%. However, commission remains the dominant method of payment, sitting at 41% compared with 38% for fees.

Use of payment by results continues to rise, with 56% of advertiser to creative agency agreements now incorporating an element of results, compared with 33% in 2000 and 40% in 2003.

Debbie Morrison, ISBA director of membership services, who commissioned the report, said: “This is a highly rigorous and extensive study, containing many new trends, which provides the definitive picture of how UK advertisers are paying their media and creative agencies.

“As with previous ‘Paying for Advertising’ studies, it provides invaluable information both for agencies and advertisers, and will undoubtedly act as a catalyst for further significant change in industry practices.”

Jonathan Lace, the author of the report, added: “Agency remuneration continues to evolve, not least with the demise of commission and the growth in PBR.

“There is much evidence to support the view that advertisers are improving the management of their agency remuneration – conducting financial reviews, auditing the agency’s financial records and involving specialist purchasing.”

ISBA: 020 7499 7502 www.isba.org.uk