Brands Are Planning a Big Shake-Up to How Media Agencies Are Paid

Only 27% of global advertisers believe their current pay structure with their media agencies is fit for the future, and 75% say they’ll amend how they pay within the next three years.

The World Federation of Advertisers (WFA) and advisory firm MediaSense surveyed 80 marketing, media, and finance leaders from multinational brands representing more than $60 billion in global ad spend.

Additionally, the companies interviewed senior agency leaders to reflect on the findings, which revealed a broad appetite for change around agency remuneration.

Several levers are driving advertisers’ desire for change, including a perceived lack of commercial transparency from agencies, and artificial intelligence upending traditional media buying processes.

ADWEEK crunched the numbers to unpack what they mean.

Hybrid models are popular, for now

Most advertisers use a mix of compensation models.

62% said they used a labor-based fee model, while 65% pay fees on commissions. 22% pay a fixed fee. 52% reward agencies based on performance, and 9% pay on deliverables. Only 6% of advertisers pay agencies using software as a service (SaSS) licensing fees.

Three in four leaders said they plan on shaking up their media agency remuneration model in the next 36 months, either with a new agency or an existing one.

For most marketers, rethinking remuneration isn’t about cost-cutting

Clients were asked their top three reasons for switching up models. Just 15% cited cost-cutting. 61% said they expected to pay agencies more within the next three years.

74% said the main reason for the change was to align compensation with business performance. Improved access to talent was the second largest driver at 42%, and 41% noted a desire to drive greater transparency.

AI is a double-edged sword for agencies

Just 18% of brands expect to pay their media agencies less in the next three years. When it comes to AI and generative AI, 58% of brands foresee handing over less dollars when the tech is deployed. AI promises to analyze vast amounts of data and generate media plans in minutes.