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Tuesday, June 26, 2018

Getting Rich In Advertising


Perceptually, advertising has always been a business where people in it did well financially, especially during the Mad Men era. But the truth is that advertising was never a business that people entered to actually get rich;  people sought careers in advertising because it was creative (and fun – since there was always an element of show business in it), with a chance to do well. Careers in advertising mostly came about because people had talent for it and loved it.   

Advertising executives were never paid as much as lawyers, finance people or manufacturers.  

It may be true of all business, but especially in advertising, nearly everyone exaggerated their own salaries and believed that everyone else was making far more than they actually were.  When I became a recruiter, I learned the hard truth – it just wasn’t so.  There was once a time (Mad Men Days), when account executives made considerably more money than their client ad manager and brand manager counterparts.  It was so much so that we were counseled not to discuss our pay with our clients.  The concern was that the disparity would cause unnecessary conflict.  

Not so any more. Starting in the eighties, when fees started to become prevalent, clients actually cut the salaries of people who worked on their account by lowering the blended rate (that is the aggregate and average salary of all people working on an account).  Today ad agencies pay far less than their clients.  At more senior levels things tend to even out, but companies, on the whole, do still pay more.

Entry level in most big city agencies is still mostly in the $30-40,000 range; MBA salaries are not much higher.  Outside of these markets, starting salaries are much lower.  Most of the major advertiser companies have starting salaries now in the $60’s or higher (I believe Procter is now paying $90,000 plus for MBA’s.   I have written before about the late, great Harold Levine, who spent ten years and his own money trying to recruit minorities in the business.  As he told me the story, one MBA at Howard University was, at the time, offered $40,000 (which was comparatively high) to start at Y&R but several of the good package goods companies offered him more than $80k to start, leaving him no choice.  Sadly, this MBA candidate had always wanted to be in advertising.
Companies  paying so much more at entry level causes a huge schism in the business (and diminishes the value of the people servicing their accounts).

It isn’t that advertising pays badly.  It is merely a business which pays its senior people well (but mostly not extraordinarily). Its juniors have to really want to be in the business and are willing to pay their dues for fifteen or more years before they get senior enough to be paid well.  And that requires a true commitment and love of the business. Few people at most agencies consider themselves to be rich.

Rich is a relative term.  In the research I did for this post, I found out that people making $50-100,000 consider rich to be making $260 or more.  But only 28% of people with net worth of $1,000,000, consider themselves to be rich.  There are many people making $200,000 a year who are actually in debt and broke.

Most executives in the business end up doing relatively well if they stay with it, but they are, to my thinking, not rich.  In fact, really rich is the millions of dollars made by the officers of the holding companies.  Wealthy is the $6,000,000+ made by Michael Roth of Interpublic or the $3 plus million made by Maurice Levy at Publicis (these people also get huge other financial perks and incentives on top of their salaries). But these people are not really advertising executives, they are mostly financial people. In fact, many of them do not even have advertising backgrounds.  In terms of the ordinary employees of the business, writers and art directors tend to be higher paid than other advertising people.  But even the most successful creative people are lucky today if they make around $300k.  I know many senior account managers and worldwide group account directors who make far less.
Now, don’t get me wrong, at $3-400,000 one can live well. But few of these people will tell you that they are rich.   

Advertising was once a place where people, especially those who owned the agency, could make lots of money.  People know that Bob Jacoby pocketed $100+ million when he sold Ted Bates to the Saatchi’s or that Donny Deutsch sold his agency for $250+ million when it was purchased by Interpublic in 1999.  But these people became the owners of their own independent businesses and spent years successfully building them so that the holding companies would eventually pay to buy them, often overpaying.  Today there are very few independent agencies which have achieved that level of financial success (The Richards Group, Wieden + Kennedy, Cramer-Krasselt, Droga 5, to name a few) and, interestingly, that I know of, none of these agencies are yet for sale, although every holding company has tried to purchase them).

The bottom  line is that if you want to get rich these days, you have to own your own shop and it has to become big enough to be attractive to the large holding companies.

In the meanwhile, we would all like to see salaries increased, especially at entry and mid-levels so that ad agencies can attract the best talent.  But for the time being, we will have to accept that people who stay in the business merely do so because they love it.

To my readers:  This will be my last post for about a month.  I am taking some much needed R&R.  See you at the end of July.



7 comments:

  1. Historically speaking, there was a time in the agency business when you could get “rich”, depending on one’s definition of rich. But that’s when agencies were privately owned. Whatever the salary, an employee’s entire compensation included base, profit sharing, fully-paid medical and dental, and at some point (usually VP or above) stock options that the agency would help you finance. Moreover, there was the opportunity to be an agency “lifer” if you were really good. At least that’s the way it was when I joined Ted Bates in 1977 with my newly minted MBA in marketing. My starting salary as an Assistant Account Executive was a humble $15,000 compared to the $25,000 Johnson & Johnson had offered me as an Assistant Brand Manager. But I wanted to be in the agency business; work with creative people; and be in New York City – not New Brunswick, NJ. And I figured that while I might not get “rich” on the agency side, I would certainly make a great living and do what I love to do … advertising. The key things for EVERYONE being a defined and long-term career path; a chance to make one’s mark; and potential equity in the agency. But that all blew up in 1983 with the “British Invasion”, when the UK’s Saatchi brothers bought Ted Bates. Then Backer & Spielvogel. Then merging the two (hence, Backer Spielvogel Bates). And so, the M&A cost-cutting frenzy began, leading to the emergence of today’s IPG, Omnicom, WPP, Publicis, Havas, Dentsu, et al. – where agency employees now no longer have any “skin in the game” beyond their next paycheck; where agency employers look at staff strictly on an “as needed” basis (like spare parts for a car); and clients caring more about agency fees than the talents on their business.

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    1. Anon, Thanks for adding your personal details to what I wrote. Incidentally, as I am sure you know, Marion Harper, Jr., who worked at McCann, started the first holding company, Interpublic, in 1961. However, he merely purchased agencies to increase services and become a worldwide agency. He did not manage them the way holding companies are run today.

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    2. Actually Paul … Harper's primary reason for forming IPG while acquiring other agencies for expanded MARCOM services was to avoid client conflicts-of-interest at McCann. Not my opinion, just a fact.

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  2. When I stayed at Y&R right out of B school I was earning $36.5. P&G also made me a job offer at that time at $40.

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    1. Not any more! Y&R paid you well for them.

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  3. Right on, Paul! We used to have a saying, "Gee, I didn't know your parents could afford to send you to Y&R" (and, of course, the old saying at Ted Bates: "If you're not coming in on Saturday, don't bother to come in Sunday.")

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