I just returned from a 12-day speaking tour thru Hong Kong, Singapore, Bangalore, and Delhi where up to 90 percent of ad revenue are paid through advertising agencies. In North America and Europe, the percentage is a lower, between thirty to fifty percent. Regardless of the percentage, you should always fear relying too much on any agency-based revenue, because when someone else is in the middle of the sales process you have lost control of your money.
I have no problem with demand-based advertising. But keep in mind that when dealing with an agency you're negotiating, not selling. Advertising sales, as I define it, is to uncover a business's problem that can be solved thru the leasing of eyeballs (or ears) that a media company has acquired.
When dealing with a "middleman" such as an ad agency, you allow someone else to uncover those problems. Figure out what eyes or ears will solve it. Decide which media is best suited to reach them. And seek out the most cost-effective means to get that media. In engaging the agency at that level, you are simply negotiating a price for the service. You are selling a commodity, not a solution. In the past, when the industry enjoyed a robust economy with less competition, we became "fat and happy," gorging ourselves on this automatic business. I guess I was lucky to learn the art of advertising sales during the early eighties, selling AM radio when FM radio was "disruptive technology" creating strong competition for my product. I had no automatic agency business. I had to learn how to seek out smaller and medium sized businesses, dealing with them directly to garner revenue.
Now fast forward to 2009, where studies reiterate that our strongest opportunity for advertising revenue growth lies with the small and medium sized businesses within our markets. In short, "you have to replace the 'big dogs' you loose with 'five little dogs' you have to get." That said, I find it fascinating that media companies will cut back on the very resources necessary to help us get these new businesses to advertise with us. With that in mind, here is what I suggest you consider as three necessary edicts you must adhere to, to ensure new business growth in these tough economic times:
Increase your feet on the street and faces on the phone. You cannot cut back on the resources that prospect, ascertain, present, and "close" the business you need to grow. It's not automatic anymore (and possibly, never again at the same levels).
Invest in better ad creation. You can't solve an advertiser's problem without great ads. If you cut back on this resource, you are giving the business back to the middle-men ad agencies. Produce the best ads you can at all times. And, have the ability to present speculative concepts as part of the sales process.
Maintain a high level of training on solution-based sales tactics. Coach the process and monitor the performance on a day-to-day basis. This will not happen on its own. You need to make the process happen.
Perhaps we can all take a lesson from the great, late sales trainer Alan Cymberg, who used to have printed on the back of his business cards: "Never attempt to sell the hand organ to the monkey!"