Ad Agencies : Clients not paying bills
February 19, 2009
We have reports that in the past few months several fortune 500 firms have not made their ad agency payment for Q4 2008 yet much less anything for 2009. A report from Adage in December stated that Chrysler was believed to owe BBDO some $80 million dollars… and our followup yielded “no comment” from BBDO.
We have seen at least 3 reports of 2 agencies close to closing shop due to clients non-payment. One of the agencies has 130 employees. We cannot state the name of the agency, but dig around.. you can find it.
In June of 2007, we reported that this was becoming more and more of a problem. The issue then was “late payments” now it’s total non-payment. These firms cannot get enough capital to pay their bills…. and the problem isn’t for future work.. the problem is regarding work already done.
“We spent $2.5 million of our money in payroll and media buys… and they have yet to pay us a penny back even though the terms of the contract were 30 days… it’s been 3 months now. If we don’t get paid within weeks we are going to have to lay off everyone.” was what we were told from one agency.
It’s like everyone has Bernard Madoff as a client these days.
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can’t they sue?
If they sue, they lose the client and they still might not collect all they’re owed. Factor in attorneys’ fees and the reputation that will forever preceed them, AND the fantasy world that most BDA heads live in where the check is always in the mail, and you can see why they probably won’t sue.
Yes they can sue … but no they won’t … for 3 reasons.. the PR fallout , loss of client and the more valid reason… the ad agency will go bankrupt prior to them winning any court case.
i actually feel bad for an ad agency, this is a first
same here… there is a difference between changing the arrangement going forward.. or NOT paying for work already done…
Any credit offered is always a leap-of-faith. A promise to pay is nothing more than that. Ironically, investments can be viewed in the same light.
It’s interesting to see which businesses have a pay-up-front model vs. those that collect after service is rendered. Clearly market conditions dictate how consideration is determined between vendors and clients.
It is hard to put a price on good agency work. Same with a lawyer or doctor or priest. It’s not like you are buying a gallon of gas. I think there was a point in time when advertising agencies held this status, but increasingly the village witchdoctor’s tricks are not as “thrilling” as before.
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