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.
 Types of advertising agencies
Ad agencies come in all sizes and include everything from one or two-person shops (which rely mostly on freelance talent to perform most functions), small to medium sized agencies, large independents.
 Limited-Service Advertising Agencies
Some advertising agencies limit the amount and kind of service they offer. Such agencies usually offer only one or two of the basic services. For example, although some agencies that specialize in "creative" also offer strategic advertising planning service, their basic interest is in the creation of advertising. Similarly, some "media-buying services" offer media planning service but concentrate on media buying, placement, and billing.
When the advertiser chooses to use limited-service advertising agencies, it must assume some of the advertising planning and coordination activities that are routinely handled by the full-service advertising agency. Thus, the advertiser who uses limited-service agencies usually takes greater responsibility for the strategic planning function, gives greater strategic direction to specialist creative or media agencies, and exercises greater control over the product of these specialized agencies, ensuring that their separate activities are well-ordered and -coordinated.
 Specialist Advertising Agencies
In addition to the full-service, general-line advertising agencies, there are also agencies that specialize in particular kinds of advertising: recruitment, help-wanted, medical, classified, industrial, financial, direct-response, retail, yellow pages, theatrical/entertainment, investment, travel, and so on.
Specialization occurs in such fields for a variety of reasons. Often , as in recruitment advertising, for example, specialized media or media uses are involved that require knowledge and expertise not ordinarily found in a general-line agency. In other cases, such as medical or industrial advertising, the subject is technical and requires that writers and artists have training in order to write meaningful advertising messages about it.
Such specialist advertising agencies are also usually "full-service," in that they offer all the basic advertising agency services in their area of specialization plus other, peripheral advertising services related to their area of specialization.
 In-House Advertising Agencies
Some advertisers choose to set up an advertising agency function within their company. Sometimes the in-house advertising agency is established to provide basic advertising agency functions. It may also specialize in one or more advertising functions, such as planning and creating advertising or media planning, buying, billing, and paying. Advertisers who choose this option believe that the in-house agency can provide services equal to or better than those available from full- or limited-service agencies. In addition, some advertisers believe that they can provide such advertising services to themselves at a lower cost than would be charged by an outside agency.
 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 multimedia-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.
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.
 Search engine agencies
Pay per click (PPC) and (SEO) search engine optimization firms have been classified by some as 'agencies' because they create media and implement media purchases of text based (or image based, in some instances of search marketing) ads. This relatively young industry has been slow to adopt the term 'agency', however with the creation of ads (either text or image) and media purchases, they do technically qualify as 'website advertising agencies'.
 Social media agencies
Social media agencies specialize in promotion of brands in the various social media platforms like blogs, social networking sites, Q&A sites, discussion forums, microblogs etc. The two key services of social media agencies are:
 Healthcare communications agencies
Healthcare communications agencies specialize in strategic communications and marketing services for the Healthcare and Life Science industries. These agencies distinguish themselves through an understanding of the strict labeling and marketing guidelines mandated by the U.S. Food and Drug Administration (FDA) and industry group guidelines.
 Medical education agencies
- Promotional education - education and training materials tied to the promotion of a given product or therapy
- Continuing medical education - accredited education and training materials created for continuing physician and medical professional education.
 Other agencies
While not advertising agencies, enterprise technology agencies often work in tandem with advertising agencies to provide a specialized subset of services offered by some interactive agencies: Web 2.0 website design and development, Content management systems, web application development, and other intuitive technology solutions for the web, mobile devices and emerging digital platforms.
The student-run advertising agency model, which mainly operates out of university classrooms or as a student groups, provides free advertising services to clients in exchange for the educational opportunity.
 Agency departments
 Creative department
The people who create the actual ads form the core of an advertising agency. Modern advertising agencies usually form their copywriters and art directors into creative teams. Creative teams may be permanent partnerships or formed on a project-by-project basis. The art director and copywriter report to a creative director, usually a creative employee with several years of experience. Although copywriters have the word "write" in their job title, and art directors have the word "art", one does not necessarily write the words and the other draw the pictures; they both generate creative ideas to represent the proposition (the advertisement or campaign's key message). Creative departments frequently work with outside design or production studios to develop and implement their ideas. Creative departments may employ production artists as entry-level positions, as well as for operations and maintenance. The Creative Process forms the most crucial part of the advertising process.
 Account services
Agencies appoint account executive to liase with the clients. The account executives need to be sufficiently aware of the client’s needs and desires that can be instructed to the agency’s personnel and should get approval from the clients on the agency’s recommendations to the clients. Creativity and marketing acumen are the needed area of the client service people. They work closely with the specialists in each field.
 Media services
The media services department may not be so well known, but its employees are the people who have contacts with the suppliers of various creative media. For example, they will be able to advise upon and negotiate with printers if an agency is producing flyers for a client. However, when dealing with the major media (broadcast media, outdoor, and the press), this work is usually outsourced to a media agency which can advise on media planning and is normally large enough to negotiate prices down further than a single agency or client can.
Without the production department, the ads created by the copywriter and art director would be nothing more than words and pictures on paper. The production department, in essence, ensures the TV commercial or print ad, etc, gets produced. They are responsible for contracting external vendors (directors and production companies in the case of TV commercials; photographers and design studios in the case of the print advertising or direct mailers). Producers are involved in every aspect of a project, from the initial creative briefing through execution and delivery. In some agencies, senior producers are known as "executive producers" or "content architects".
Modern agencies might also have a media planning department integrated, which does all the spot's planning and placements
 Other departments and personnel
In small agencies, employees may do both creative and account service work. Larger agencies attract people who specialize in one or the other, and indeed include a number of people in specialized positions: production work, Internet advertising, planning, or research, for example.
An often forgotten, but integral, department within an advertising agency is traffic. The traffic department regulates the flow of work in the agency. It is typically headed by a traffic manager (or system administrator). Traffic increases an agency's efficiency and profitability through the reduction of false job starts, inappropriate job initiation, incomplete information sharing, over- and under-cost estimation, and the need for media extensions. In small agencies without a dedicated traffic manager, one employee may be responsible for managing workflow, gathering cost estimates and answering the phone, for example. Large agencies may have a traffic department of five or more employees.