Expert: Peter Gabany - 1/17/2008

Question
Hey Peter,

I myself was kind of confused with this subject...why I don't know, but I am.

Gross is what the client pays
Net is what the agency pays..

I have a new position at an Art Magazine,
rates are nothing higher that say about 5300 for a full page ad..

You said in an answer to another person "genavieve" I think it was.. at the end of your answer you said that tipically the agency would get the NET, "less the 15%"??? I'm confused by this.. Please help me out here.

Thanks.. Dominick NYC

Answer
Dominick,

I'm sorry if that is what I said - it is confusing. The agency would be billed the NET and mark it up 17.65% (Cost of media X 17.65% or Cost of media /0.85) which delivers the agency a 15% margin.

For your full page - if this is a NET cost where the agency would then mark it up then the formula would be $5,300/0.85 = $6,235.29. If the $5,300 is gross cost - what you would get from a non-agency client - say a supplier of art supplies then the agency would earn a commission of 15% or ($5,300 X 15%)– = $4,505. earning the agency 15% margin. You can check this by taking the amount $4,505/0.85 = $5,300.

Some publications do not offer an agency discount (to their folly and yours) and those that want you to ad 15% to the magazines gross amount wll not earn the loyalty of the agency.

Fact and opinion.

I hope that this helps.

Pete