Common Misconceptions

THE WEALTH OF AGENCIES

The prevailing myth is that advertising agencies are huge and slick and rich. This is because agencies list their size in terms of billings (the money they handle) instead of income - which is like a bank teller listing his wealth as the the total amount of checks he cashes in a year. Actually, agencies average 1.8 employees per million dollars of billing, which means that - in terms of staff - a $5 million dollar agency is roughly the size of a small drugstore.

"BILLINGS"

An advertising agency, like a blimp, is big on volume but small of cabin, and all the rest is gas. $5,000,000 in billings goes mostly to media and production houses (see pig) and may, if all goes well, yield $80,000 in agency profits. In retrospect, trying to look big and important by giving their size in terms of billings was probably the dumbest thing advertising agencies ever did. Every time a city or state government starts casting about for something new to tax, they take one look at all those multi-million dollar advertising billings and tears of joy shine in their eyes. The price of puffery.

HOW HONEST IS ADVERTISING? Critics of advertising claim that 20% to 30% of all ads are misleading, which would seem to imply that 70% to 80% of all ads are completely accurate. The same critics accuse advertising of persuading people to buy things they do not need and cannot afford. However, 90% of all new products fail despite their advertising, so this criticism can't be more than 10% accurate. Thus advertising is seven to eight times as honest as its critics.