It’s Time to Kill the In-House Agency Discount
During my almost 20 years of working with magazines, I have had the good fortune of working with large circulation association magazines, as well as much smaller circulation magazines that focus on a very targeted readership. Regardless of the size of the circulation and readership, however, all of the magazines had one thing in common: They offered a 15 percent discount to ad agencies.
When the ad agency discount was first introduced many, many years ago, it was basically a reward given to agencies for all of the work they did to recommend the best places for a client to advertise and negotiate a special price for their client, while also committing to the ad schedule and making sure that the artwork was sent to the publication at the correct time. The ad agency received 15 percent of the total ad buy in exchange for doing all of the legwork needed to get their client’s ad in the right places for the right price.
Over time — and with technological advancements that brought information to everyone’s fingertips — clients started questioning why they were paying for an ad agency when they could do their media buys on their own. The popular idea evolved that clients should form their own in-house agencies and take the discount for themselves — and many did.
When the idea of an in-house agency was first born, most advertisers set up legitimate in-house agencies that had a different name, bank account, letterhead, staff, etc. Since these in-house agencies were more or less doing everything an external agency was doing, it made sense to publishers that these in-house departments should receive the agency discount.
However, as money has become tighter over recent years, the in-house agency has changed. In the majority of organizations now, the in-house agency is simply one or two people who design their organization’s ads and select the media outlet(s) where these ads will be run. These individuals are not an actual in-house agency, but they call themselves one so that they can receive the 15 percent discount. And even if they are fair enough to admit to a publisher that they are not, in fact, an in-house agency, they still have no problem asking the publisher for the agency discount.
Is this legit? I say “no!” In these cases, the advertising organization is simply gaming the system in order to pay less for their advertising. The advertiser is not receiving the guidance, knowledge, or services they would receive from a full-service agency — but the advertiser is receiving a reduced price, basically for doing their own work.
Ad agencies perform a valuable service for companies that use them to place their advertising, and real agencies deserve to get compensated for that service. In-house agencies in name only do not perform that service and should therefore not be rewarded with a discount. Instead of offering an in-house ad agency discount up front, I believe it’s time for association publishers to work with their advertisers to negotiate a deal that helps advertisers achieve their goals at a price point that works for both sides.
Things have changed in the advertising world, and it is time for association publishers to change with them. Eliminating the in-house agency discount may seem like a small thing, but it will definitely have a positive impact on a publisher’s bottom line, which is always a big thing.
Scott Oser is president of Scott Oser Associates.