An advertising agency or ad agency is a service business dedicated to creating, planning and handling advertising (and sometimes other forms of promotion) for its clients. An ad agency is independent from the client and provides an outside point of view to the effort of selling the client's products or services. An agency can also handle overall marketing and branding strategies and sales promotions for its clients.

Typical ad agency clients include businesses and corporations, non-profit organizations and government agencies. Agencies may be hired to proadvertising campaign.

Full-Service Agencies

Most Full-Service Agencies work on a combination of fee-based and commission based compensation. The fee is paid by the entity for which the marketing is being done. The commission is a payment from the media to the agency and is usually equal to 15% of the cost of the advertisement. The broadcast media, radio and television, traditionally pay a commission.

Full-service, or media-neutral advertising agencies produce work for many types of media, creating integrated marketing communications, or through-the-line (TTL) advertising. The "line", in this case, is the traditional marker between the media that pay a commission to the agency and the media that do not.

Full-service agencies are also known as traditional advertising agencies for the client, wherein the client satisfies almost all their advertising or promotional needs with the same organization. This type of agency provides advertising services such as stratagic planning, creative developement, production, media planning, media buying, and other related services such as sales promotionals, direct selling, design, and branding, etc.

Interactive Agencies

Interactive Agencies may differentiate themselves by offering a mix of Web Design/Development, Search Engine Marketing, Internet Advertising/Marketing, or E-Business/E-Commerce consulting. Interactive agencies rose to prominence before the traditional advertising agencies fully embraced the Internet. Offering a wide range of services, some of the interactive agencies grew very rapidly, although some have downsized just as rapidly due to changing market conditions. Today, the most successful interactive agencies are defined as companies that provide specialized advertising and marketing services for the digital space. The digital space is defined as any multi-media enabled electronic channel that an advertiser's message can be seen or heard from. The 'digital space' translates to the Internet, Kiosks, CD-ROMs, DVDs, and Lifestyle Devices (iPod, PSP, and Mobile). Interactive Agencies function similarly to advertising agencies, although they focus solely on interactive advertising services. They deliver services such as strategy, creative, design, video, development, programming (Flash and otherwise), deployment, management, and fulfillment reporting. Often, Interactive Agencies provide: Digital Lead Generation, Digital Brand Development, Interactive Marketing and Communications Strategy, Rich Media Campaigns, Interactive Video brand experiences, Web 2.0 website design and development, e-Learning Tools, email marketing, SEO/SEM services, PPC Campaign Management, Content Management Services, web application development, and overall Data Mining & ROI Assessment.

The recent boost in Interactive Agencies can also be attributed to the rising popularity of web-based social networking and community sites. The creation of sites such as MySpace, Facebook and YouTube have sparked market interest, as some Interactive Agencies have started offering personal and corporate community site development as one of their service offerings. It still may be too early to tell how agencies will use this type of marketing to monetize client ROI, but all signs point to online networking as the future of brand marketing.

Due to the social networking explosion, new types of companies are doing reputation management. This type of agency is especially important if a company needs online damage control. If a customer becomes disgruntled, it is very easy to damage a companies reputation over social networking sites. Because of how rapidly the information spreads, it becomes absolutely necessary to address any rumors, gossip or other negative online press immediately.

Tradigital Agencies

Tradigital agencies are advertising agencies who are experts in both traditional and digital advertising [1] [2]. They offer the best of both worlds and are very useful in today’s digital age where all campaigns now require both online and above-the-line advertising.

These agencies often buy out digital agencies. Now more then ever traditional agencies are looking for a door into the digital world. The are often the only way to extend your band across all the numerous mediums of todays markets.