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Ad agency commission model declared 'dead'

The head of OgilvyOne's Asia-Pacific division says ad agencies should be compensated through fees and retainers, rather than receiving 15% of the cost of an ad.

John Goodman, Asia-Pacific president of OgilvyOne, the interactive and CRM division of Ogilvy & Mather, has told ITP.net that he believes the agency commission model is “dead.” Increasingly, he says that advertising agencies are moving towards fees and retainers, and away from taking 15% of the cost of an advert as commission from the client.

“15% is dead and there’s a growing trend for advertising to move towards fees rather than commissions,” Goodman told ITP.net. “From my point of view that’s a healthy development. If your pay depends on how much advertising you run, then inevitably your recommendations are skewed. Nobody who’s dependent on 15% commission is going to say don’t run advertising.

Those comments are sure to raise eyebrows in the Middle East, where many advertising agencies still take 15% of the cost of an advert in commission.

Goodman, who was in the UAE this weekend to address the Emirates International Forum, also said that he’s optimistic the advertising industry may be coming out of last year’s trough. He is not, however, expecting a return to the heady days of the 1990s.

“I think this year is not going to be a great year,” Goodman told ITP.net. “It’s a year where we survive, regroup, become more disciplined and efficient, and don’t pay out huge bonuses to everybody.”

Goodman, who is responsible for a territory that runs from India to Japan, says that the second half of last year was “pretty grim” for the industry. That, he says, has given way to a “note of optimism” that the worst may be over, although the picture is by no means rosy.

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