Marketers to Revamp Digital Agency Compensation

Digital agencies supply critical expertise for many marketers. While these shops are relatively new, marketers have been paying them the same way they pay traditional agencies, using a fixed or labor-​based fee arrangement. But the latest survey on this topic indicates changes are on the horizon.

As digital comprises a larger part of the typical ad budget, marketers have been  increasing the number of digital agencies they use. In addition, the wide variety of digital platforms available and the niche expertise required in each channel means marketers must engage with more agencies to get the job done.  The tasks typically assigned to outside digital agencies include "search engine marketing buying" and "online advertising media buying/​planning," as well as "creative development/​execution of mobile/​third screen advertising/​applications."

The following figures show the percentage of marketers that use 5 or more digital agencies:

  • 2011: 44%
  • 2009: 39%
  • 2007: 23%

Costs and management difficulties are rising as marketers use more digital agencies so many are looking for ways to institute control. In the past year about 43% of marketers changed the way they pay digital agencies and another 50% will do so this year. One of the biggest areas of adjustment has been the performance incentive with about 25% of marketers making a change in this part of compensation. In addition, about 66% of marketers now favor paying digital agencies with a combined annual retainer/​project fee format. David Beals, President and CEO of R3:JLB, and one of the industry contributors to the recently published ANA (Association of National Advertisers) survey, believes that “the use of incentives with digital agencies is now catching up to the rest of the world, and I would expect to see a continued increase in coming years."

In the meantime, marketers are still struggling with the best way to handle social media tasks, corporate websites and digital analytics. For now, they are keeping some of these tasks in-​house and outsourcing others to digital agencies. If these agencies can cost-​effectively provide expertise, they may be able to win more retainer fees and incentive payments.

[Source: ANA Survey Finds Fee Persist as Dominant Method of Digital Agency Compensation. ANA​.net. 21 Jun. 2011. Web. 7 Jul. 2011] 
Kathy Crosett
Kathy is the Vice President of Research for SalesFuel. She holds a Masters in Business Administration from the University of Vermont and oversees a staff of researchers, writers and content providers for SalesFuel. Previously, she was co-​owner of several small businesses in the health care services sector.