History of advertising: No 121: Francis Ayer's open contracts

For something supposedly dead, the commission system has shown a remarkable capacity for survival since its birth almost 140 years ago.

History of advertising: No 121: Francis Ayer's open contracts

In fact, it has proved extremely difficult to oust it completely from what was its long-term role as the standard method of agency remuneration.

Commission survives – albeit in a less ubiquitous fashion – mainly because nobody has been able to devise an alternative system that’s completely fair and equitable.

The commission system remains a testament to the foresightedness of Francis Wayland Ayer, a Mas­sachusetts-born ex-teacher. He not only invented it but also revolutionised the way agencies operate.

Ayer was something of a prodigy, setting up his agency in Philadelphia in 1869 aged just 21. He called it NW Ayer after his lawyer father, Nathaniel Wheeler Ayer, believing it would add credibility to a start-up launched by someone so young.

Ayer couldn’t understand how space brokers could represent advertisers while being paid by publishers. His answer was the full-service agency that would create, produce and place ads.

And to address the conflict of interest issue, he developed the "open contract plus commission" system under which his agency would represent and be paid by the advertiser instead of the publisher.

As a result, agencies became space buyers rather than sellers, adding a commission of up to 15 per cent to the cost of the ad space. No longer did agencies have to squeeze advertisers to make a profit but acted on the advertiser’s behalf.

The system became established practice after 1893 when the American Newspaper Publishers’ Association agreed to abide by Ayer’s published rates and not to bargain with space brokers.