15-20 years ago, media agency fees, including tech and data were c. 2% of the media budget, they have ballooned to now represent nearer 10-15% (not including rebates etc).
Agency revenue is however under threat as agentic processes and advertiser insourcing “bite” at scale. Time & materials remuneration schemes based on the amount of labor show transparently the reduction in agency costs, through harnessing technology, and hence a decline in agency revenue.
As a result of the threat to income some agencies are seeking to add “outcome-based fee” elements to their bonus/malus schemes. Whilst others are seeking to protect revenues by suggesting replacing all time and material costs or commissions with pay-for-results or “outcome-based remuneration” schemes. For example, an agency may charge an auto client for a “cost per test drive” as opposed to transparent agency fees, tech & data costs, and media pricing.
A 2026 World Federation of Advertisers (WFA) study found that 85% of respondents expect the model to grow and 81% believe it can strengthen client-agency relationships. However, 69% identified attribution as a major barrier.
Outcome-based pricing can obscure underlying costs unless the contract preserves cost visibility and audit rights (ie. you may not get to see the true costs of media, staff, or tech & data). And, “outcomes” are notoriously hard to consistently and accurately measure and manage (ie. Is the success of a campaign due to creative, media, product, pricing, distribution or other factors like weather, and do you have common KPIs across all media and markets). Yet, with agencies pushing these schemes, are they good for advertisers?
| Pros | Cons |
|---|---|
| Creates a visible “we win when you win” relationship and directs the agency towards the advertiser’s objectives rather than staffing or spend. | Sales, profit and market share are affected by creative, pricing, product, distribution, promotions, competitors, economic conditions and client decisions – not just media. The agency can be rewarded or penalised for events it did not cause. |
| Makes business impact part of everyday agency decision-making and gives marketing a stronger value story with finance and the board. | Consistent Attribution and measurement are very difficult. Just building baselines are difficult. |
| Rewards value created | Non-transparent – may mean that the advertiser pays significantly more than the cost of the media, staff, tech and data |
| Focus on core KPIs | May lead to unintended consequences like poor environments and brand protection issues |
In many instances the effort/cost to measure outcomes, that may or may not be attributable to the agencies work, with a loss of transparency, and the risk of paying the agency more than a fair margin will mean the answer will be a resounding “no”.
For these advertisers the chance to reduce agency fees by keeping the transparency of time and materials fees, realizing the benefits of tech and data, and optimized media costs is a better opportunity than the potential benefits.
For other advertisers a hybrid scheme where outcomes are part of a bonus and malus scheme that comprise a significant proportion of agency income give the best balance between incentivization and transparency.
For those advertisers that have great metrics, where media is highly attributable to sales/core business KPIs, and can benchmark their fees and performance are better advised to take advantage of outcome-based fees – assuming they can negotiate them to lead to a beneficial business outcome for themselves, rather than the agency.
Benchmark your agency fees. Work out if you can measure media attribution. Decide whether transparency is an important topic for you. Fill out the form below and we’ll be in touch.
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