Business Glossary

method of payment for advertising agency services whereby the advertiser is charged a fixed monthly, bimonthly, semimonthly, semiannual, or annual sum for all the services provided by the agency.

1. fee that an advertising agency charges a client for time and effort spent in selecting and supervising production work done by another company (e.g., printing, photoengraving, photography, commercial recording, filming, and film editing). The amount charged the client is usually 17.65% of the gross production cost.
2. compensation paid to advertising agencies by the media (broadcast or print) for purchases of time or space made on behalf of clients. Since the ad agency saves the media the expense of direct sales and billing, the media allows the agency a 15% discount (16.67% for outdoor advertising), based on the gross advertising rate billed to the client. (The discount also serves as incentive to the agency.) For example: If XYZ Corporation spends $1 million on advertising placed through a recognized ad agency, the agency commission is $150,000 and the balance of $850,000 is paid to the media. The agency commission system represents the basic financial structure of the ad agency business. See also fee basis.
   Magazines: amount paid a subscription agency for its efforts in selling a subscription, based upon a percentage of the price paid by the subscriber. Agents are usually paid 80% to 90% of the selling price, depending on the expected impact of that magazine on the agent's total sales goal. Some magazines are featured in order to draw attention to other titles the agent sells, and the publishers of the featured magazines are rewarded with lower commission payments.