What is an ad agency?

The types

• Creative. Concept, campaign idea, production.
• Media. Planning and buying — where the spend is, and where most agency money now sits.
• Performance. Digital acquisition, optimised against measurable outcomes.
• Full service. All of the above, usually within a holding company.
• Specialist. A single discipline or channel done deeply — including, increasingly, AI advertising.

How agencies are paid, and why it matters

The compensation model shapes the advice more than most clients account for.

Commission on media rewards spending more, regardless of whether more spending helps.

Fee or retainer removes that incentive and introduces a different one — scope becomes the negotiation.

Performance-based aligns incentives on paper, and in practice tends to push toward the channels that attribute well rather than the channels that work, which is not the same thing.

Undisclosed arbitrage, where an agency buys media and resells it at a margin, is the arrangement worth asking about explicitly.

What to ask

Two questions separate a straightforward relationship from a complicated one. How are you compensated, in full, including any rebates or trading arrangements with media owners. And who owns the data, the accounts and the measurement when the relationship ends.

The second matters more than it seems. An advertiser whose campaign history, audiences and platform accounts belong to the agency has a switching cost that is not on any invoice.