Why are advertising agencies expensive?
Many of today’s advertising agencies still use the old business model of days past. Two main culprits that hold agencies back are still being used today: Spec Ads and Media Buying on credit. Spec Ads are mock proofs created in advance without compensation. They are often presented in a professional setting to potential clients with the hopes that the client will like it and decide to purchase it. As you can imagine, this creates a lot of unnecessary, uncompensated work, not to mention extra expenses in labor, travel, and other overhead. Media Buying is when the agency buys placement for a media spot with a 3rd party (ie. magazine page, radio spot, etc.) on behalf of the client. The problem is that placement is traditionally purchased first by the agency and then reimbursed later by the client. The agency then needs a large cash flow on reserve, with an accounts receivable nightmare of collecting payment for all of the invoices, not to mention the inherent risk involved. These two extre
