Billing Rates for Advertising Agency Executives
Hourly Fees Appear High Until Compared with Lawyers and MBAs
Oct 3, 2009
Large American advertising agencies report that in 2008 they billed their clients an average of $974 per hour for chief creative directors, the Don Drapers of the 21st Century. That was 3.5 times higher than the average rate quoted by agencies with 50 or less employees.
The figures come from a 2009 survey conducted by the American Association of Advertising Agencies (4A’s), which released the numbers of its annual survey for the first time. The statistics are normally provided only to 4A members.
Ad Age.com pointed out that the survey numbers represented what agencies ask for their services, but clients may often negotiate lower rates. It also noted that the billing figures cover both the individual’s salary and agency overhead costs associated with his or her work.
It’s unknown how much Don Draper, the creative director in television’s “Mad Men” made back in the 1960s, but his life style indicates he and his agency were well paid. However, $974 in those days would have been a fortune. And judging from Draper’s personal work distractions, he would have had a lot of unbillable hours.
One industry source said ad agencies normally determine their rates by multiplying an individual’s compensation by two or three. That compares with multipliers of 4 to 6 for lawyers in large legal firms and MBA’s in business consulting firms.
The 4A survey also reported the following average billing rates in large (over 500 employees) and small agencies. Large agency rates are listed first.
- Executive director for print production: $391 and $134
- Executive media director: $478 and $194
- Executive research director: $427 and $260
- Director of client services: $533 and $203
- Executive director for client planning: $601 and $240
In small agencies, one person may handle two or more of these functions. The 117-page 4A's survey report includes rates for 130 different positions in 230 agencies, an indication of the wide variety of management structures in the industry.
The major differences in large and small agency rates were in chief creative director (3.5 times) and executive directors for print production (2.9 times). The ratios were smallest among executive research directors (1.64 times).
The survey also revealed major rate differences between the Northeast agencies and those in other parts of the nation. New York showed the highest billing rates.
Ag Age pointed out that most agencies were still billing by the hour despite recent buzz about value-based billing replacing hourly billing.
Publication of the survey results prompted some strong responses to the Ad Age article.
- From Junction, N.Y.: “I don't care who you are. Unless you are getting paid on sales generated, you are never worth $700 - 900 an hour.”
- From Chennai “Obviously, economies of scale do not work in advertising agency, else why would the large agencies charge more per hour and take longer to complete the work!”
- From Oak Brook, IL: "Sounds like the industry has morphed into the legal profession. Not encouraging… Great talent available in smaller shops that are more nimble and cost-effective.”
- From Sycamore, IL: “The wrong thing is being measured. Clients should be concentrating on total cost and value provided--not hourly rates.”
- From Boca Raton, FL: “I hope this does not create major backlash against the advertising industry in general. $750 an hour is not reflective of what many of us who do exceptional work charge.”
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