Dive Brief:
- A new report from the American Association of Advertising Agencies paints a dismal picture for agencies and pay-for-performance deals, with 53% of the deals forcing agencies to risk base compensation as part of the deal.
- The 4A's report also shows that performace-based deals weren't as common as one would expect — only 39% of agencies had entered into any type of performance-based deal.
- For two-thirds of agencies, those deals only generated less than 2% of their annual gross income.
Dive Insight:
In theory, performance-based deals look great. It makes sense that brands would want to compensate for results and that the deals would inspire agencies to work harder. The reality, though, is that performance-based deals place focus only on activities driving direct results. Those are important, but there are plenty of critical activities that aren't as easy to prove but still drive results, and they could suffer from performance-based compensation. Creativity doesn't flourish well in environments were results are the only thing that matters, either, and the 4A's report seems to underscore these ideas.
