How Ad Agencies Work

What creative and media agencies do, how they earn money through fees and commissions, and how global holding companies dominate the industry.

Brands often use advertising agencies.

Types of agencies

Creative agencies: ideas, scripts and designs.
Media agencies: plan and buy ad space on TV, digital and print.
Digital and social media agencies.

How they earn

Traditionally, a 15 percent commission on media bought.
Today, often fees or retainers, plus performance bonuses.

Holding companies

Global groups own many agencies:

WPP (Ogilvy, GroupM).
Omnicom (BBDO, DDB), which agreed to buy Interpublic in 2024.
Publicis and Dentsu.

Indian creativity

Indian ad campaigns like Cadbury’s “Kuch Meetha Ho Jaaye”, Amul’s topical cartoons and Fevicol ads became famous. Piyush Pandey of Ogilvy was a leading figure.

Media buying power

Media agencies buy ad space in bulk for many clients, gaining discounts from channels.

Disruption

Brands increasingly buy digital ads directly.
Consultancies and in-house teams compete with agencies.

The media buy

A media agency buys TV ad slots for ten clients during a cricket series, getting better rates than any single brand could negotiate.

Thinking brands make all their own ads

Many use creative and media agencies.

Key takeaways

Creative agencies make ads; media agencies buy space.
Agencies earn commissions or fees.
Global holding companies like WPP dominate.
Digital and in-house teams disrupt agencies.