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15% Commission Versus Fee

David L. Smith, writing for the OnlineSPIN newsletter, argues for the application of the standard 15% commission structure to online media buys claiming that, without it, it is confusing and potentially loses money for an agency:

"I have seen several attempts at Web housekeeping systems of late where the agency percentage was added to the net cost, rather than computed on the gross equivalent. Why does this matter? 15% on $100,000 in net spending is $15,000. But if you take $100,000 net spending for any other medium, and try to make the commission 15% of gross spending, you must use a formula that is 100/85* net spending. As anyone who knows media math, this is the equivalent of multiplying the net spending by 1.1765%. This yields a total of $117,650 of which $17,650 is the agency commission, not $15,000. Try the math yourself. You will see that $17,650 is equal to 15% of $117,650. What does it matter? The difference of $2,650 or 15% could be the agency margin or the difference between the agency making a profit or not."

And this:

And you try to explain the above formula to a client who does not understand media math, and why you cannot just take 15% of the net spend. Or a client who thinks he has made a deal for 10% of the net that he has to pay 10% of the gross or 11.765% of the net."

Sheesh, who wants to deal with that on a daily basis and try to explain it to a client every time an invoice goes out?

My reply:

I can't believe we are even talking about commission anymore. For years, it's been fees. You bring up the confusion surrounding the gross up, net down math problem. Why would we ever want to bring that back?

As you point out, the time it takes to resolve this misunderstandings is a huge time suck. Net billing either pass through agency to client or better yet, direct to client (eliminating agency exposure), with a fee that is based on the work done is far simpler and far more relevant to the amount of work required to do the buy.

In fact, with a fee arrangement, an agency can get most its money even if the buy never happens because you fee bill for the planning/buy prep which is most of the work anyway.

And that "lost" $2,650 you refer to? Moot. It's all built into the fee and tied to overhead, profit, etc. Clean and simple.

Works wonders in this particular skittish environment where client's desire's are bigger then their wallet.

We should want KISS, not PITA (pain in the ass)

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by Steve Hall    Jul-15-02    




Butts, Butts, Butts

No...not that kind of butt. Cigarette butts. High on the annoyance scale who are those who choose to smoke while driving and then seen to have no concept that they have an ash tray in there car so they throw the butt out the window....so it hits my fuckin windshield!! Not to mention the fact that it is LITTERING!!! For fuck's sake, keep your shit to yourself. If you want to smoke, fine. I know a lot of people who smoke and I like them. But, don't dump your shit on me. Use your ash tray. Don't litter the world. We have enough shit to deal with already. It's gross, it's disgusting, it's lazy.

Have a fuckin clue, don't litter!

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by Steve Hall    Jul-12-02    




Do You Know What You Look LIke in That?

We (men and some women I suppose :-) ) all love to see beautiful females in halter tops, tank tops, tube tops, belly shirts, tight pants, etc. But, for God's sake, look in the mirror before you go outside. I'm amazed at the people I see wearing this type of clothing with fat rolls bulging out from between the tight pants and the tight top. It's like the fat is saying to itself, "Finally, a place to escape!" and it goes BULGE!

Now, there's the cute baby fat fat and then there's the go find something more sensible to wear fat. No, I have nothing against fat, uh...excuse me, "weight challenged" people but do they really want to dress like Brittany spears when they weight 240 pounds? Does anyone want to see that? Do they know what they look like when they dress like that?

Look in the mirror!!


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by Steve Hall    Jul-12-02    




Check This Out!


1000journals is a project that I came across that has been going on since August of 2000. It was started by a guy who is circulation 1000 journals around the globe. You sign up to receive a journal at this website, you add to it, and you send it along to the other person. The contents of the journal is added to the website.

Blogging taken to the next level.
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by Steve Hall    Jul- 9-02    




Frustrated Writer

Here's the problem. I have these flashes of these amazingly vivid movie sequences and plots that A. disappear from my head if I don't write them down immediately (and I rarely do) and B. they never get fleshed out into even a simple written idea. Why is it that I can create an entire movie in my head that I KNOW is good....but I simply cannot get it onto paper? It's very discouraging.

And yes, I've heard it all: Just do it. Just start writing. Blah Blah Blah.

All I know is that it is going to be a man's experience with cancer, family, death, dreams, the search for a new life and the realization that maybe he had everything he needed in the first place.

Hmm...not bad for a premise. So, I say to myself....just start typing....


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by Steve Hall    Jul- 9-02    




Drew Barrymore is Awesome!

Drew Barrymore is such an amazing actress and producer. She has had such a tough life but she is so incredibly on top of her game right now. It is so wonderful to see her stuff. Sure, she's done some cheesy stuff but most everything she is in is such a pleasure to watch. From great works such as Riding in Cars With Boys and Donnie Darko to ...ah...Freddie Got Fingered, everything about her is enticing. She works on blockbusters such as Charlie's Angels and exec produces for intruiging new directors such as Richard kelly (Donnie Darko).

I just saw, again, Never Been Kissed and yea, it's pop, but it is done so well. She such a hilarious clutz in that movie. Besides, I'm a sucker for tear jerkers.

Well, if I ever finish my script, I'm sending it to her first!


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by Steve Hall    Jul- 8-02    




Hmm...Maybe Telemarketers Do Have A Purpose

From MediaPost's Real Media Riffs:

Was He Served An Absolut Vodka Ad With That Call? According to Reuters, a hiker stranded in an Andes mountains blizzard escaped death thanks to a timely call from a telemarketer. Leonardo Diaz, on a hike in late May, was stuck above 12,500 feet in the mountains when he tried calling out on his cell phone but found that his pre-paid minutes had run out. Diaz remained in the storm for 24 hours, slowly freezing to death, when his cell phone rang. It was a Bell South telemarketer calling to ask whether Diaz wanted to buy more pre-paid minutes.
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by Steve Hall    Jul- 5-02    




What's Next? MaxUniverse?

In the ongoing worldwide consolidation trend that will net out with only one company in each industry, Doubleclick and L90 further come together. Read about it at MediaPost
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by Steve Hall    Jul- 1-02    




Media Research

Center for Media Research is a great place for media and audience research blips.
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by Steve Hall    Jul- 1-02    




How Repositioning Should Really Be Done

From my favorite web site, AdWeak:

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by Steve Hall    Jul- 1-02    




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