What’s it: An advertising agency is a company specializing in the planning, creation, and placement of advertisements for its clients. It may also provide other services, such as facilitating the marketing communication process and other promotional strategies.
Advertising agencies usually link advertisers and media owners. They are compensated for the services provided, usually through a commission system where the amount depends on the agreement.
Here are the five biggest advertising companies in the world.
|Agency name||Headquarters||Revenue (billion USD)|
|Omnicom Group||New York||15.3|
|Interpublic Group||New York||7.5|
Types of advertising agencies
Broadly speaking, there are two types of advertising agencies:
- Full-service advertising agency
- Specialty advertising agency
A full-service advertising agency is involved in the planning and administration of advertising campaigns. Some of the scopes of their services and activities are:
- Setting advertising goals
- Develop an advertising strategy
- Develop and produce advertising messages
- Develop and implement a media plan
- Doing advertising research
- Coordinating activities such as sales promotion and public relations
- Acting as a marketing consultant
Meanwhile, specialized advertising agencies usually concentrate on one function. An example is developing and producing advertising messages or media plans.
Despite the limited services, specialized advertising agencies are highly skilled at doing the job. The specialization of services makes them one step better at providing a specific service than a full-service advertising agency.
Apart from the above classifications, you can also classify advertising agencies based on the media they focus on. For example, traditional advertising agencies serve ad placements in conventional media such as television, radio, newspapers, television, magazines, and billboards. Meanwhile, digital advertising agencies serve ad development to be placed on websites or social media.
Departments in the advertising agency
Advertising agencies play a vital role in the success of any advertising campaign. Advertisers use their services because they understand how successful advertising works. They help companies develop effective advertising messages within budget and meet advertising goals. Take product advertisements as an example. They help the company create awareness, generate liking, convince, and stimulate the target audience to buy the advertiser’s product.
Advertising agencies can have a variety of different functions depending on the size and range of services offered. Some of the main functions of an advertising agency are:
- Planning department
- Creative department
- Media planning department
- Production department
- Account management
- Traffic department
The planning department is responsible for finding the right formula for a compelling advertising message. This division prepares advertising and marketing campaign plans to meet business needs and adapts them to advertising goals and budgets. The team seeks to develop an idea of what makes an ad attractive to the audience and fulfills its purpose.
To do so, they must understand and do research about consumers. Media consumption behavior and the effectiveness of each media on consumer purchasing decisions are two main focuses. They then link it to variables such as demographics and psychographics.
The creative department takes care of the creative aspects of advertising. This is where the ad is structured, developed, and produced. Artists, copywriters, graphic designers, and creative producers work together to craft messages that meet agency and client goals.
Teams design the advertising message as attractive as possible through visual elements such as images, typography, or videos. They adapt it to each used media such as television, radio, magazines, newspapers, or the internet. That way, the ad stimulates the audience’s enthusiasm, making the advertising message easier to stick with the target audience’s mind.
Media planning department
Media planning deals with schedules in different media. This division decides where, when, and how often to show specific ads. The team identifies and selects the most effective for the advertising campaign. The primary considerations for media selection are usually the reach, frequency, cost per ad, and potential impact.
The team then buys space or time in various media. They set the duration and scope of the campaign for each advertisement in each medium.
The production department is responsible for creating advertisements. They prepare the logistics of the advertising campaign. In addition to relying on internal resources, the team may have to hire external studios, camera crews, and actors.
The team also coordinates the works of the creative and media departments. It is responsible for tasks such as scheduling, printing, shooting, and other aspects of production.
Account management dedicates its time to understanding the needs of each client. They use their findings to develop and prepare advertising strategies for other departments. This department bears primary responsibility for client satisfaction.
The traffic division coordinates schedules in each department so that deadlines are met. The team determines the timing of all work at all stages. That way, advertisements can be sent to the media on schedule.
Advertising agency income
There are various ways an advertising agency generates revenue. They may charge clients a fee for each work performed. They bill each time a job is completed or be collected monthly, quarterly, or annually.
Alternatively, they charge clients an hourly fee for their services. They also add markup items for any work that uses external resources, such as studio, printing, and photography facilities.
The next alternative is that agencies can be paid on a yield basis, for example, based on a fixed percentage of the net impact of advertising in increasing client business. One measure is the percentage of sales on the advertised product.
In addition to charging clients a commission, advertising agencies also get discounts from media owners for the ads they place. That, of course, contributes to the profits. The higher the discount, the higher their profit.