Advertising agencies are called 15% men. This is a real puzzle. Why 15%? 15% is the commission that the advertising agencies get as commission from the media for making the client advertise in a particular media vehicle. 15% commission is paid only to advertising agencies and not to individuals and companies who approach the newspaper/media vehicle directly.
But in many cases 15% is not paid on classified advertisements. Why? The following is the one of the reasons why 15% commission is not paid to the advertising agencies.
One of the local newspapers in Hyderabad is very popular. It gets lots of classified advertisements on a Saturday (for the Sunday issue).
The customer who wants to run classified advertisement has to approach the booking clerk. The booking clerk would calculate the number of lines and words. let us say it comes to Rs 1,000/-. He would say “you have to pay Rs 1,000/- and you would not get any discount. But would you like have 5% discount?” Naturally the customer would be interested in the discount.
The customer would be asked to approach the advertising agency. The agency then would issue a release order (a release order is an instruction from the advertising agency to the newspaper authorizing the release of a client’s advertisement. It is released by the advertising agency on behalf of its client)
The customer would be billed Rs 950/- (he gets 5% discount) the advertising agency gets 5%, Rs 50 rupees and the booking clerk of the newspaper would get 5% or Rs 50./-. Many of my readers would sneer at the Idea of getting Rs 50/- .
But let us remember that the newspaper would get something like Rs 10,00,000/- on a weekend. 5% on that would mean Rs 50,000/- for the booking clerk and Rs 50,000/- for the advertising agency. And that means Rs 1,50,000/- loss every week for the newspaper That is Rs 6,00,000/- loss for a month.
This scandal was on for many many years. Finally jealous coworkers (who were not given a cut?) revealed it to the management who put a stop to this unhealthy practice.