Final answer:
The majority of an advertising agency's expenses are in salaries and benefits for employees, which generally exceed media costs, production overheads, and other expenses due to the specialized skills required in the industry.
Step-by-step explanation:
The majority of an advertising agency's expenses are likely to be in the area of salaries and benefits for employees. In most service industries, human resources constitute the most significant cost as professionals in the field possess specialized skills that command higher wages. Additionally, costs associated with media buying, production overheads, and market research are significant but do not typically surpass the substantial investment in human capital. For example, large parts of a campaign budget can be allocated to media costs such as television, internet, and direct mail. Yet, the collective salaries, benefits, and commissions paid to agency personnel are typically the most substantial line item.
Reflecting on industry spending, roughly one-third of the U.S. advertising economy is spent on television advertising, with the remaining budget spread across internet, newspapers, radio, and other miscellaneous sources.