The commission helped build the advertising agency. That history also explains why it can’t be expected to fund everything an agency contributes today.
By Chris Marine, Founder and CEO, Campfire Consulting
The advertising agency didn’t begin with a brand workshop or a creative department. In the early American business, the opportunity was much more straightforward. Newspapers had space to sell. Advertisers wanted customers. An agent helped connect the two and earned money from the transaction. Nearly two centuries later, that history still influences how we talk about agency compensation, even when the assignment has very little in common with selling newspaper space.
Duke University’s advertising history dates Volney Palmer’s Philadelphia agency to 1841 and describes the early business as brokering newspaper advertising. Agencies began to resemble full-service operations in the 1870s and 1880s. The distinction matters. Commission grew out of a business organized around placing advertising. It wasn’t developed by first identifying every contribution a modern agency might make and deciding that a percentage of media spending fairly valued them all.
The percentage had a purpose
Researchers Sharon Horsky and Robert Zeithammer trace commission’s origins to agents selling space for publishers. Their paper, The Rise of 15%, examines how percentage compensation persisted as agencies began representing advertisers and offering research, copy and planning. Selling more space was a logical basis for rewarding a publisher’s representative. Once the agent’s responsibility expanded to helping an advertiser decide what to do, the relationship between the transaction and the value of the advice became more complicated.
One important change was itself an advance in transparency. According to the Smithsonian, N.W. Ayer introduced its “open contract” in 1876, giving advertisers access to publishers’ actual rates and charging an agreed commission based on advertising volume. The agent’s role was moving toward the advertiser’s side of the table. We should give that development its due. A structure we question today could represent progress in the market that produced it.
The familiar 15% system became a financial foundation for the agency business. The 4As describes the traditional mechanics as an advertiser paying the gross media amount to the agency, which retained 15% and passed 85% to the media property. Agencies also simplified publishers’ credit relationships by standing between them and individual advertisers. This was a particular commercial arrangement with a purpose. It was never an objective measurement of the value of every idea, recommendation or process an agency could provide.
The agency’s capabilities grew around that foundation. Research, creative development and marketing counsel are longstanding parts of the profession. Strategy wasn’t invented when digital advertising arrived. The historical lesson is that a transaction-based revenue model came to support a much broader service business. Later, that bundle began coming apart. The 4As traces the separation of media assignments from full-service agencies and the subsequent rise of media agencies in the 1990s. The services were being reorganized. Their economics needed to be reconsidered, too.
The work extends beyond the placement
Today, we have plenty of alternatives to commission. The question is why we still sometimes expect a commission agreement to support an undefined strategic partnership. A brand may need help understanding customers, connecting campaign reporting to sales or developing a more useful testing process. It may also need a better brief, clearer approval responsibilities and a way to turn findings into decisions. These assignments require expertise and resources, but their value doesn’t necessarily rise with the amount of media purchased.
This is where I think agencies will earn their future relevance. A campaign can launch successfully while the client’s team continues struggling with the same internal problems. Reporting still requires manual reconciliation. Approvals still arrive too late. Each campaign starts from scratch because nobody has established how learning carries forward. Helping improve those conditions can make the next campaign better and give the internal team more time to focus on decisions that matter.
That contribution needs to be defined and assessed. If we improve a reporting process, can the team spend less time assembling numbers and more time using them? If we establish a testing approach, does it lead to clearer decisions? “Strategic partner” has to mean something the client can recognize. Agencies can’t expect a premium for calling ordinary account service transformation. We need to identify the problem, agree on the work and demonstrate what changed.
The 4As’ 2025 paper, Agency Compensation and the Transparency Trap, offers useful context. Based on an October 2024 study of 25 search consultants, it argues that an excessive focus on internal cost inputs can obscure the value of expertise. It also identifies unclear deliverables and scope creep as barriers to better compensation arrangements. That’s a challenge to both sides. Experience can make a team faster, and a faster answer may be extremely valuable. But the agency still needs to explain what the client is paying for.
Build the scope before choosing the formula
Different assignments call for different arrangements. Hourly compensation can accommodate exploratory work whose requirements are still emerging. A fixed project fee can give both sides clarity around a defined assignment and agreed assumptions. A retainer can fund ongoing services or strategic capacity, provided the agreement specifies what’s included. Commission can cover an agreed buying and management scope, while a hybrid arrangement can fund strategic responsibilities separately. Performance incentives can supplement the relationship when both parties can credibly measure results and agree on what the agency can influence.
None of those labels does the scoping for us. A fair scope starts with the business objective and the contribution the client needs. At Campfire, we look at internal capacity alongside the platforms, markets, creative collaboration, data requirements, testing rhythm and reporting involved. We also need to understand who supplies information, who approves recommendations and how priorities can change. Two businesses with identical media budgets can need very different kinds of support.
A useful agreement makes those responsibilities visible. It identifies the decisions the agency will support, the work it will deliver and the resources required. It also establishes how to revisit the assignment when circumstances change. Routine planning already included in a media agreement shouldn’t become an unexpected extra charge. Equally, a substantial new responsibility shouldn’t disappear into an existing percentage without a conversation about how it will be supported.
In an October 2026 Decideware contribution published on ANA’s website, Robin Seasock draws on the ANA’s 2025 compensation research to argue that changing the payment mechanism won’t fix a relationship without a shared understanding of value. I agree. Replacing a commission with a retainer accomplishes little if everyone still has a different understanding of the assignment. Agencies have to be willing to define their contribution, price it responsibly and remain accountable for delivering it.
The history gives us context, not a reason to dismiss every commission arrangement. The problem is asking a structure rooted in the media transaction to serve as an unlimited claim on everything an agency knows. I believe our relevance will depend increasingly on the quality of our counsel and the processes we build that help clients work better and grow. If that’s the contribution we want to make, the agreement needs to recognize it. The agency has changed. The conversation about what we’re buying from it needs to change with it.
A note on how this was made. These thoughts and words are my own. I did use AI as an editing tool to help structure the narrative, tighten the writing and keep the ideas focused. The experiences, opinions and point of view are mine.
