The Structure of the Advertising Industry:

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Presentation transcript:

The Structure of the Advertising Industry: Chapter 2 The Structure of the Advertising Industry: Advertisers, Agencies, and Support Organizations

The Ad Industry in Transition: Trends and Transformations Consolidation and globalization Budget fragmentation Interactivity Media evolution Media clutter New Communication/ distribution channels Ch 2: The industry 2

The Worldwide Advertising Industry U.S expenditures: $250 billion Global expenditures: $450 billion Ch 2: The industry 3

Structure of the Advertising Industry Ch 2: The industry 4

Advertisers Manufacturers and Service Firms Trade Resellers Government Procter & Gamble, MCI Trade Resellers Sears, McDonald’s Government Federal, State, Local Social Organizations United Way, Nature Conservancy Ch 2: The industry 5

In addition to companies, the Government Makes extensive use of advertising

Agencies Full-Service Creative Boutique Interactive In-House Media Buying and Planning Services Promotion Agencies Direct Marketing E-commerce Sales Promotion Agencies Event Planning Agencies Design Firms Public Relations Firms Ch 2: The industry 7

Advertising agencies make extensive use of advertising to acquire new clients

Full Service Agency Account Services Marketing Research Services Creative and Production Services Media Planning and Buying Services Administrative Services Ch 2: The industry 9

Agency Compensation Commissions: around 15% of airtime fees. Markup Charges: production cost + fixed %. Fee Systems: hourly rates, or by project. Pay-for-Results: tightly-specified objectives. Ch 2: The industry 10

External Facilitators Marketing and Advertising Research Firms Consultants Production Facilitators Information Intermediators Software Firms Ch 2: The industry 11

Media Organizations Broadcast Print Interactive Media Support Media TV, radio Print Magazines, direct mail, newspapers Interactive Media CD-ROMs, online shopping Support Media Outdoor, directories, Sponsorship Media Conglomerates AOL Time Warner, Viacom, AT&T Ch 2: The industry 12