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What does Advertising Agency do

The advertising agency is the second important component of the advertising spectrum. If the advertiser is the originator of the entire process, the advertising agency is the instrument through which advertising is conceived and planned by advertising specialists, working as a team to render advisory and creative services to advertisers in planning and preparing advertisements, and in placing and checking them, on a fee or commission basis.

From the business point of view, the financial operations of an advertising agency are very different from those of every other commercial organization. It is an advertiser who appoints an advertising agency to plan, produce and distribute advertisements to help market and sell its products and services. Apart from certain services, for its overall work, the agency receives no payment from the advertiser, whom it serves. It is the media, which constitute the main source of income for the advertising agency. Thus, in the usual business concept, the advertising agency acts as an agent for the media, who pay a commission to the agency. Hence for an advertising agency to function requires a formal 'recognition' from the media. It is with the agency that the media sign a contract for the utilization of the space or the time, as the case may be, and not the advertiser.

Legally it is the advertising agency and not the advertiser that is responsible for all the payments to be made to the media. This is really a peculiar situation. The major share of its income comes from the media, but the advertising agencies loyalty is to the advertiser. This is a historical development and continues even today. The question has come up in recent years about the validity of this system with the expansion and diversification of the services expected and offered by the advertising agency, most of which have nothing to do with the media and are charged for separately. New developments are also taking place within this system. Media agencies are emerging, which are buying space and time in bulk at special rates and reselling them to the advertising agencies at a higher rate and thus making a profit. Some advertising agencies are also setting up subsidiary media-purchase organizations for this purpose. In this way it is possible to earn more than what is available through the old commission system.

In this context, it is helpful to have some idea of the historical processes through which the advertising agency system, as we know it today, has emerged. Its roots have to be traced back to the invention of printing, the appearance of printed newspapers and the industrial revolution. Printing with metal types was invented in the fifteenth century in Europe and spread widely to meet the demands of trade and. commerce as the industrial revolution took shape. Mass production called for mass distribution and hence, mass communication. Newspapers began to appear to meet this need by carrying advertisements. The first press advertisement on record was in the UK in 1652. By 1687 the number of advertisements increased to such an extent that a London newspaper introduced a special section or supplement just for advertisements.

Advertisements in those days were very different from the elaborate affairs that we are familiar with today. They were very much like our classified advertisements. Some advertisers tried to use their imagination and inventiveness by using large and small types to draw attention to some parts of their message. The message was also full of promise. So impressed was Dr Samuel Johnson, the Englishman of letters and lexicographer of the eightieth century, by the advertisements of his time, that he wrote: "The trade of advertising is now so near perfection that it is not easy to propose any improvements." By the early decades of the nineteenth century the circulation of English newspapers reached 122,000,000. Advertising revenue also increased and paid for the cost of production, enough to keep the price of the newspaper low and yet reap a profit. Francis William, in a study of the history of newspapers, has said: The daily press would never have come into existence as a force in public and social life if it had not been for the needs of commerce to advertise. Only through the growth of advertising did the press achieve independence.

Increased advertising in the newspapers gave rise to a new profession: advertising agents or space contractors. This was at the beginning of the nineteenth century in the UK. These agents were individuals who sold advertising space in newspapers to advertisers. They were given a commission on the value of the space sold. This remuneration became standardized at 15 per cent of the total business procured. Soon these agents began to contract for a certain amount of space and doled them out to the advertisers. It was not possible for advertisers to secure space in certain newspapers without going through these agents or space contractors. As business grew, the number of agents increased. Competition also grew. Price cutting followed, depending on the ability of the agents to bargain with the publishers and the advertisers.

Soon some agents realized that it was not enough to sell advertising space in the newspapers. It had to be properly used. They felt that they might be able to sell more space if they could also produce the advertisements. Thus, from sellers of advertising space, the idea of service to the advertiser emerged. The need was for creative people. The first such service agency to come up in London was of James White in 1800. He teamed up with his friend Charles Lamb, the well-known essayist of those days, he is known to have been engaged in writing copy for advertisements of lotteries launched by the British government. Obviously he wrote advertisements for his friend as well. Newspapers too began to provide similar services. From copy, they moved to designs and illustrations. This provided additional income for their art departments set up to meet their own needs of newspaper and magazine layouts and illustrations. The advertising agencies had to follow suit. This was a slow process. In the early part of the twentieth century the agencies began to offer free service to the advertisers to be able to compete with the art departments of the newspapers. By the second decade of this century, the advertising agency emerged as a full-fledged service agency, more or less as we know it today. Already the newspaper society had appeared in the UK to regulate relations with the advertising agencies. Professional and business associations of advertising agencies also developed. Thus the advertising business emerged as a profession, qualified advocates at the bar of public opinion, responsible for promoting appreciation of and demand for advertisers' goods and services. With the development of modem industrial civilization the advertising agency business spread in all developed countries and through them in what were then the colonies.

Demands of the expanding and diversified market contributed to diversification of the activities of advertising agencies. Techniques developed and principles evolved. The capitalist system is engaged in compulsive search for new technology to increase production, reduce costs and enhance profits. This is a continuing process. The advertising agency business has also to grow along with this system, responding to the new demands of marketing communication. Thus, over the years, has emerged the modem advertising agency involved in a complex of activities-advertising, marketing and public relations counselors, specializing in market research, media evaluation, merchandising, layout and design of advertisements in different media, supervising printing, production of films, TV and radio commercials, and so on. New methods, new technique~ and even new equipment, including computerization, have made the advertising agency a highly sophisticated, dynamic and complex business enterprise.

In India too, advertising agency business developed more or less in the same fashion. First came printing, brought to India by the Portuguese and later developed by the British. The earliest known printed work in India, dates back to 155~religious books published by the Jesuit missionaries in Goa.

By the beginning of the nineteenth century the missionaries had started their printing presses in India. By that time the newspaper industry had already emerged as a social force. With the coming of the East India Company, India became part of the trading economy of Britain. With the industrial revolution India also became an important market for British goods. The British brought mass production, mass market and mass distribution, creating the need for mass production of the written word to inform potential consumers about the different goods and services available to them. Advertising became an essential communication link between the producer and the consumer-first the British expatriates and the new middle-class Indians created by British education and government service.

During this early period, from the mid-nineteenth to the beginning of the present century, the advertisers were mainly British business houses. The press was practically the only medium. There were no advertising agencies. There were only space contractors acting as commission agents for the newspapers. Very few advertisements had any illustrations. Designs and layouts, when used, came from England. Then came the swadeshi movement. It gave a spurt to Indian industries. Indian advertising agencies began to emerge. In 1907 the India Advertising Agency was established in Bombay. Calcutta followed with the Calcutta Advertising Agency in 1909. Then came B. Dattaram in Bombay, our oldest surviving advertising agency. In the meantime some of the leading newspapers set up their own studios to provide some facilities to their advertisers in areas of copy, layout and illustration.

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