Advertising agencies can be compensated in several ways: 1) The traditional commission system pays agencies 15% of media spending but is becoming less common. 2) Fee arrangements involve agencies and clients negotiating a flat fee for all work. 3) Cost-plus agreements base fees on costs plus an agreed profit margin, used when media spending is low but agency work is high such as for new products. 4) Incentive-based models tie compensation to predetermined goals like sales targets or creative work quality.