Profit share or risk avoidance?Posted: September 19, 2005
Today’s Wall Street Journal carries a piece on how small advertising agencies are taking a share of their client’s revenues for product and services they create the ads for. This will sound familiar to those in the tech agency world who were surrounded by startups in the late 90s all waving stock certificates in return for services. There were of course some significant winners such as Niehaus Ryan Wong that got founder stock in Yahoo!. Sadly it turned out that even that couldn’t save the firm and it went under in early 2002 as the full effect of the downturn in the tech sector hit.
If the advertising industry wants to take this path then I wish them luck. I for one hope the PR industry stays well clear of this murky business. While at one level it sounds great we need to remember we are PR people not VCs. These programs are divisive and rarely profitable. They are a cheap way for a client to get marketing support while the agencies shoulder the risk.
I do wonder whether this news piece came from it being a slow news day or because Chris Lawton, that wrote it, has been inundated by firms all saying they are doing this. I truly hope it was a slow news day.