How do media agencies make money? Can someone explain in detail?

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Exploitation of employee labour beyond a 40/45 hour workweek, mainly.

likesmartfunny

Several models, but some combo of:

1. Retainer fee. Typically based on an FTE model built against a specific SOW. Can fall anywhere from 3-20% of total media spend.

2. Commission. % of media spent. Lately most often applied to digital channels. Can be as low as 1-3% for things like print or ooh, or as high as 6-15% for digital.

3. Incremental scopes. Flat or % based fees for things out if scope.

4. Media/tech offerings. Agencies negotiate low media rates based on large volume of thier client base, and arbitrage that back to clients. Ie, agency buys hulu for $8, charges clients $10, but open rate is $14. Some are more transparent than others at this.

5. Specialty service fees. Content strategy, custom analytics, global management, etc.

All of this is usually calculated off various forumlas for direct talent costs + overhead + profit margin.

likehelpful

They charge a % fee based on dollars booked. Pretty straight forward. Place $1,000,000, agency fee of 9% and you made $90,000.

Additional costs for clients are less about agency profit…things like production and things like that are more of just pass through type costs.

The actual ad spend is where the fee is applied.

Commission vs. retainer is extremely client-specific.

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I'm a customer that wants advertising for my products. I approach an agency.

That media agency can do, up to and including, a media strategy, media purchasing/negotiation, campaign setup, optimization, all manner of analysis ranging from attribution to medium and long term modeling, etc.

You typically pay a % f the media budget for these services or retain (pay on a per person basis) for specific people or services to work on your account.

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