Advertising Agency | Meaning | Role | Evolution | Need | Classification & Types


Advertising Agency is one of the main component of the advertising industry. It is the facilitating institution of the advertising industry.

Advertising Agency

Advertising Agency – Meaning, Role, Evolution, Need, Classification

Advertising agency helps the advertiser in the creation of advertising. They provide a full range of services to the advertiser — from the conception of idea to printing of an advertisement. So, advertising agencies organize various activities and maintain a formal structural relationship with various departments.

Some large industries have their own advertising department to take care of advertising. Sometimes, they also seek the help of advertising agencies. But small scale industries invariably engage an advertising agency as they cannot afford to have an advertisement department on their own.

Advertising agencies are professional organizations, that create advertisements and advertise them through appropriate media. They offer specialized knowledge, skill and experience that are required to produce an effective advertising campaign.

What is an Advertising Agency?

An advertising agency is an independent firm formed for the purpose of rendering specialized services in advertising, such as preparing copy and layouts for advertisement, getting blocks made for layouts and getting the advertisement out through suitable media. In short, it is an independent agency engaged in the preparation and placing of advertisement for and on behalf of the advertisers.

An advertising agency may be a sole proprietorship concern or a partnership firm or a joint stock company. But it is an expert body, having various departments, manned by specialists, such as artists, copywriters and media experts, etc.

Role of Advertising Agency

An advertising agency performs all the necessary functions on behalf of the customer or advertiser. So, if an advertising agency is engaged, the advertiser must cooperate with it fully to achieve the desired results.

An advertising agency charges remuneration, for its services either on the basis of commission fixed beforehand or at a fixed percentage of the media bill. The remuneration may also be charged on fee basis i.e., a lump sum payment as agreed upon between the agency and the advertiser.

An advertising agency may be an in-house agency that performs a full range of advertising services. Some advertising agencies that do not offer full range of services, employ specialists to do a particular skilled work.

Before we study about the various aspects of an advertising agency, let us see the evolution of advertising agencies.

Evolution of Advertising Agencies

The evolution and history of advertising agencies can be well understood by dividing their role over a period of time into three stages i.e., Space broker stage, Standard services stage, and Marketing services stage.

1. Space Broker Stage

The first advertising agency was started as a space broker in a newspaper by Volney B. Palmer in U.S.A., in 1841. He acted as a simple agent, selling space for his client’s newspaper on a commercial basis. He made no effort to help the advertiser prepare copy, design a layout. Many brokers followed him doing the same activities.

Later on, the brokers started buying a number of pages from a given newspaper and then resell to various advertisers at whatever maximum price they could realize. The arrangement later led to price cutting as the advertisers sought the lowest possible price. At this stage, there was little emphasis on advertising planning and on the development of the best possible media schedule.

2. Standard Service Stage

A new plan was devised by N. W. Ayer & Son in 1876 which minimized the dubious practice of brokering advertising space. The agency entered into an agreement with advertisers in such a way that the advertisers placed all their advertisements through N.W Ayer and Son, and they bought space for their clients at established rates as published by newspapers and magazines. This plan was adopted and followed by all other advertising agencies due to competition.

In the process, the agencies started performing such duties as campaign planning, copy writing, art work, layout, media selection and research. By the end of the 19th century, the advertising agencies almost standardized all their activities. Hence, this period was known as standard service stage.

3. Marketing Services Stage

This stage stressed the need for improved services from the advertising agencies. The agencies had grown in size and scope over the years. Their approach had become more professional. The agencies ‘fine tuned’ their activities to the changing marketing needs. They started producing effective advertisements by taking into consideration factors such as consumer psychology, needs and wants.

Need or Importance of Advertising Agency

Even if a company has an efficient advertising department on its own, there are several reasons in favor of use of these agencies. They are

1. A company cannot have all types of specialists such as copywriters artists, design staff, market research experts, etc. But an advertising agency can afford to employ these highly-paid specialists on a permanent basis, because their costs are spread over many advertisers. Hence, it is economical and cheaper to use the services of an advertising agency.

2. An advertising agency can take an unbiased or objective view of any advertising problem. The agency can see the product, its merits and demerits through the ‘eyes’ of the buyers. This objectivity is not possible for an advertising department of the company.

3. The rich experience of an advertising agency, gained dealing with many products and clients could be fully utilized by the advertisers.

4. A company’s own department may not have much time to produce results: an advertising agency can be put under pressure for giving effective performance at shortest possible time.

5. If services offered by an advertising agency are poor or unsatisfactory, it can be easily terminated by the company. However, an inefficient advertising department cannot be easily wound up in an organization.

6. Finally, the agency is paid by the media owner. The advertiser pays nothing for the use of an agency while buying advertising space. He has to pay the same cost if he places an advertisement directly with the media owner,

Classification and Types of Advertising Agency

Independent or In-house Agency

Based on ownership, advertising agencies are of two types. They are

  1. Independent and
  2. In house.

An independent advertising agency is one that is free to compete and select its clients (account). On the basis of ownership, an in-house agency is owned by its major client and it is not free to serve other accounts. For example, the advertising department which is common in retailing, is an integral part of the organization it serves.

Advertising departments of retail stores and production crew in media offices create a tremendous  volume of advertisements. The majority of newspaper advertisements are developed within the newspaper organizations using creative skills.

An independent advertising agency, serves more like an organization’s appendage; separated from its control but coordinating with it in matter; connected with its advertisements, involving mass media.

Types of Advertising Agency-On the basis of Organizational Structure

On the basis of organizational structure, two types of advertising agency can be noticed. They are —

  1. Departmental type advertising agency and
  2. Group type advertising agency.

1. Departmental Advertising Agency

This type of organization is based on the principle of having a separate department for each major advertising function. Each function will be performed under different departmental heads. Each department deals with their clients separately. For example, a copy writer works for four or five accounts and writes copy for four or five products.

2. Group Advertising Agency

In this type of organization, generally, an accounting executive, a copy writer, and layout artist form as a team. The idea is to make a team of trained individuals for specialized clients. The team also uses the services of the other units like media research, mechanical production, accounting etc. This type of organization is considered as most suited for large advertising agencies.