By Simon Marquis, the chairman of ZenithOptimedia, campaignlive.co.uk, Friday, 10 March 2006 12:00AM
Increasing commission has only one purpose: to incentivise agencies to spend more on radio. How can agencies square that with any credible claim to a media-neutral approach to their clients' business?
The fact is that commission paid by the media to agencies is a 19th- century system designed to reward agencies for bringing revenue to the newspapers. Today - indisputably - agencies are employed by clients not the media, yet their remuneration still comes from their suppliers not their customers. It's hardly ideal.
The IPA (with ISBA, MCCA and PRCA) has produced a best practice guide to agency remuneration. It suggests different ways of rewarding agencies.
It talks of how much media commission is rebated to the client by the agency, though nowhere does it question the principle of the media paying commission.
But why in the 21st century do the media continue to pay agencies commission?
They have sales and marketing departments to promote their time and space, while advertisers appoint agencies to make and place ads on their behalf.
Ideally, it is they alone that should pay agencies.
Agencies worry about proper recognition and reward for their efforts but advertisers will never wholly take responsibility for this while the media continue to fund agencies with transparent commissions or undeclared sur-commissions, and why should they?
Perhaps if all commissions paid by the media were to cease and all trading done at prices net of agency commission, it might force clients and agencies to sort out remuneration properly. Could such a change put a stop to sur-commissions and other incentives? Probably not, but that wouldn't matter as those can and should be dealt with in the contract between client and agency.
Clients would pay their agencies a decent fee for their services and have the comfort of knowing that any other sources of income are transparent.
Trust would surely be strengthened as, in the words of the IPA guide, "client and agency interests and priorities would be aligned". It shouldn't make any difference at all to media owners.
An end to media commission sounds cataclysmic though it surely needn't be. It could even be the breakthrough the ad business needs to establish itself as valued, valuable and transparent.
This article was first published on campaignlive.co.uk