Gross Sponsorships for Mad Men

Advertising agencies are king of the advertising world. Most of the dollars spent in advertising and marketing pass through an advertising or media-buying agency. Over the years, I’ve had my share, both good and bad, of discussions with agencies. And like many colleagues, I hang up the phone with an account manager and say “they just don’t get sponsorship.”

Actually they do.

But a distinct issue for agencies is – how are we going to make money off of a sponsorship? Agencies aren’t built to necessarily buy sponsorship and activate the program. Unlike creating a TV ad and buying time, sponsorship falls completely out of their model for making money.

Many agencies aren’t geared to execute street marketing programs, design a fleet of experiential tour trucks, or build out trade show booths. Perhaps because they cannot make money on sponsorships, they steer clear of involving their client in sponsorships.

Ad buying agencies make their money by receive a percentage of what they purchase for their client at a gross rate – meaning – the agency takes anywhere between an 8% -15% cut off the price of the media and that’s how they’re paid. Realize that the media “lifts” the rate they offer to agencies in order to make up for some of the difference of selling ad space directly to the brand versus through the agency. This is called a “gross rate” versus a “net rate.”

I’m not suggesting a major conspiracy here. But it’s possible that because the way North America’s sponsorship discipline developed (no measured media, no gross and net rates to agencies), it’s growth has been stymied because decision makers aren’t able to find a way to make a profit off of it. Look at the growth of the digital media space. Digital media can be measured in a myriad of ways and agencies make money off design (Websites/Facebook Cause pages/digital ads) and placement.

So, would it make sense for the sponsorship industry to offer a gross rate to agencies? How would it effect sponsorship broker fees? Would there be an overall reduction in sponsorship rates from it? I realize there’s a lot of questions to be asked before heading down this road. But, as an industry, shouldn’t we be thinking of ways to make it easier to say “yes,” especially to a discipline that we know works so well!

I respect the fact that agencies need to make good decisions for their clients and also make profitable business decisions for themselves. Maybe it’s time our industry makes it easier for agencies to do both.