Advertising agencies make money by charging their clients an hourly fee for their services. In addition to the fee, an agency places a markup on the price of all outside service work that is used, such as type, printing, photography, video production, etc., to complete a client's project. The markup varies with each agency, but the standard is 15 percent to 20 percent. Some agencies will charge as much as 30 percent to 50 percent. If they are asked to produce a rush job for a client (24 hour turnaround), it is not unusual for the agency to charge the client 100 percent markup on both agency fees and outside services. Along with fees and markup, an agency also earns a 15 percent commission from most media companies for the advertisements they place. So if an agency buys $10,000 in television time to run a client's commercials, the station that sold the time to the agency will give them a 15 percent discount off the total price of the purchase. That means that the agency will actually bill the client for the entire $10,000, but the agency will only have to pay the station $8,500.
Years ago, many advertising agencies were able to operate their businesses on commissions only. But the
