Kickbacks, commissions and working for free

Long ago, but not that far away, the ad biz was a very different place, kids....

Long ago, but not that far away, the ad biz was a very different place, kids.

Not that I’m old or anything, but I’ve been told there was a time when not one single Canadian ad agency with sufficient cash flow to buy its president and his good wife a couple of airline tickets to the ICA off-season Bermuda conference had ever gone under.

Yes, it was that swell! When I was creative director on one of Canada’s biggest accounts at the tender age of 24, the client would come to a meeting at the agency once a year and say something like well, we spent eight million with you last year and it seemed to work, so we’ll spend 10 million with you next year. And then they’d notice it was almost 11:30 and repair to Winston’s for the afternoon.

A nice long lunch was probably the least you could do for a client who, in 20 seconds, had fundamentally written you a cheque for one million, five-hundred thousand in the next calendar year. A year, by the way, in which one could purchase a new Corvette Stingray for five thousand bucks, just to put things into perspective.

Such was the gentle genius of the 15% commission system. Of course, you’d have to purchase ten million bucks worth of TV time. But you’d only pay eight million, five hundred thousand for it, ’cause you were an accredited agency, old chap. And you’d have to send your ex-CBC TV producer to Los Angeles to make four or five TV commercials. But you charged back your costs, and added seventeen-point-six-five for your trouble as well.

The late, great David Ogilvy went one better. In Ogilvy On Advertising he advises clients to offer their agencies sixteen per cent commission. This, he felt, would focus their minds on the business, as well as double their profit on the account. You’ve gotta like the man.

And if that wasn’t a pretty good way for agencies to make enough money, there were lots of more, um, resourceful schemes floating around. The wink-wink-nudge-nudge invisible volume rebate was rumoured to be the funding source for half the Christmas parties in town. And they were big parties, too.

One agency was famous for never paying the final one-third of the television production houses’ bills. (Ultimately, there wasn’t a film house in the city that would even quote on one of their storyboards, but it took years for that to happen!)

Another agency would base its new business pitches on the promise that if they were awarded the account, they’d take several million dollars of Other People’s Money from their bank account and invest it in shares of the client’s publicly traded stock, causing it to rise both sharply and predictably. Well, you can’t say they weren’t creative!

If you’re curious about how agencies and buying services get paid today, the answer seems to be every way you could possibly imagine and then some. The official ICA party line is nicely enunciated on their Web site, and it’s interesting to note that in 1995 in the U.S., 14% of advertisers still paid a full 15% commission, down from 33% in 1992. Forty-five per cent paid a reduced-rate commission, and 35% paid fees.

So there are commissions and shaved commissions and fees and bonus arrangements and stock deals and kickbacks and incentive schemes and the ever-popular how’d you like to work for free deal.

I polled some industry pals on how they get paid, which is just a bit more awkward than asking them what they like to do in bed. One top outfit said a campaign is seventy-five thousand. A roll-out of an old campaign is fifty.

There are people who charge everybody in the agency, from president to lowly gofer at a hundred-and-change an hour. The Workers’ Paradise Approach! This means never having to tell your client your own rate is actually five hundred bucks an hour.

I’ve heard there are agencies who, from time to time, say they work for free, but charge like bandits as the work goes through their satellite studios, printers, and sundry captive suppliers.

Personally, I tell clients that my hourly rate is that of a mediocre downtown lawyer. But after speaking with my friend the hotshot downtown lawyer last week, I find I’ve recently been charging less than a mediocre downtown lawyer. Shit.

I asked Gary Reinblatt (yeah, the McDonald’s Gary Reinblatt) how agencies should get paid. Gary, who’s undoubtedly spent billions and made trillions by willing the creation of great advertising, replied It’s never what you pay. It’s what you get.

Barry Base creates advertising campaigns for a living. He writes this column to promote the cause of what he calls intelligent advertising, and to attract clients who share the notion that many a truth is said in jest. Barry can be reached at (416) 924-5533, or faxed at (416) 960-5255, at the Toronto office of Barry Base & Partners.

From Karen Howe’s dining table: Creativity, COVID and Cannes

ICYMI, The Township's founder gathers the best of the best campaigns and trends so far.

Cannes Base Camp

By Karen Howe

I’m attending Cannes from the glory of my dining room table. There’s not a palm tree in sight, yet inspiration and intel are present in abundance.

Cannes Lions is a global cultural pulse check. The social course correction in the wake of the murder of George Floyd and BLM has delivered far greater diversity in the judging panels as well as the work. And we are all better for it.

I’m proud to say that creativity defeated COVID, which speaks to its power. Great work and big ideas flourished, despite unimaginable odds.

The work from the past two years spans a vast emotional range. From the profundity of Dove’s “Courage is Beautiful” to the hyper exuberance of Burberry’s “Festive,” they are opposite ends of the spectrum, but each answered a need in us.

Take note, the ascendency of gaming cannot be understated. Smart brands have embraced the channel. It makes sense, because gamers participate to meet others around the world, not just to play. And they represent a huge and powerful community. That’s why QSR Wendy’s gamified their iconic gal in RPG’s Feast of Legends.

Burger King sponsored the unknown Stevenage Football Club, transforming the team into online heroes and vaulting BK into the fray at the same time. Once again, the brand embedded itself in culture.

The birth of gaming tourism arrived when Xbox snuggled up to travel guides and created a brilliant baby: a travel guide for gaming worlds. It, too, embedded itself in culture.

From the standpoint of social good, Reporter Without Borders showed how it worked with Mindcraft for its “Uncensored Library” to bypass press censorship, with Minecraft providing a loophole to a space where young people could be educated. It provided youth with a powerful tool to fight oppression: truth.

COVID changed us in unexpected ways. We learned how to pay attention again and there was a notable lack of 30-second commercials. Instead, longer format content thrived. Apple’s WFH was seven minutes long. Entertainment reigned king, so we find ourselves returning to our advertising roots.

Seeing competitive brands form partnerships was one of this year’s other great surprises. The brilliantly simple “Beer Cap Project” by Aguila to reduce binge-drinking saw the brand reach out to competitive beers to join in. Aguila put incentivizing (keyword: free) reminders to drink water, eat food and get home safely on its bottle caps from all sorts of fast food chains, ride-share co’s and H2O brands.

On a personal level, I’m so proud of Canada again this year. Given that it was two years of work from all over the world being judged, even making the Cannes shortlist was an accomplishment. Canada is herding in the Lions in tremendous numbers – and it’s not even over. Fingers are crossed.

KAREN-HOWE-PIC-higher-rez-300x263Karen Howe is a Canadian Cannes Advisory Board Member and founder of The Township Group