Eric B. and Rakim were insistent on being 'paid in full'
  

Advertising is a weird business.

It is extraordinarily difficult to value what ad agencies do.

One campaign may help create a $40 billion brand. Another may disappear without a trace.

Worst of all, successful work may continue to be successful, long after the ad agency has stopped being paid. For example, I still buy a certain chocolate bar based on an ad I saw for it over 20 years ago. The campaign has long since changed (I don't like the new work) so the original ad agency is still succeeding, but not getting any benefit for it.

So, what to do?

Most ad agencies simply charge fees for their time, with perhaps a small bonus or at-risk element that nods to 'payment by results'. 

We all know this model is unsatisfactory, yet very few alternatives have been proposed.

One PR agency offered to charge clients only if it achieved coverage for them. (Note, I can't find any trace of that company's website, so I'm not too sure how it worked out for them...)

An agency in Holland offered clients a pay what you want model.

And last week, Coca Cola announced a scheme to pay agencies a bigger bonus for non-traditional campaigns than for regular work, which is at least innovative.

At the heart of the problem is the age-old conundrum about what advertising agencies actually are. Are we providers of professional services - like lawyers and accountants - in which case a fee structure would be appropriate. Or are we producers of creative works - like songwriters or novelists - in which case a royalty makes more sense.

The truth is we're neither, and a bit of both.

Like I said, weird business.
 

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