Undoubtedly one of the most significant developments to affect marketing worldwide in the 21st century has been the development of the Internet. As a communication tool the Internet is emerging as a new challenge to mass media advertising. As a result advertising agencies need to readdress their techniques, services and agency structure. Additionally, the shape and form of the traditional advertising agency will need to change along with the adoption and usage of this new interactive media channel. Agencies are now being forced to consider broadening their service offerings to clients. Apart from widening their service offerings, advertising agencies are being driven to invest in building and sustaining valuable client relationships to establish client loyalty, with profit and a healthy bottom-line being the ultimate objectives. Bush, Bush and Harris (1998) point out however, that whilst a growing number of companies are interested in developing an online presence, significant confusion remains about what this new medium will offer stakeholders in the advertising industry. The study undertaken in this thesis explores the relationship between two influential stakeholders in the advertising industry - advertising agencies and their clients. To explore this relationship, the study modified Parasuraman, Zeithamal and Berry's (1988) SERVQUAL model to explore whether gaps exist between agency-client expectations of the value of the Internet as a promotional tool. The SERVQUAL model, which was designed for measuring gaps between service expectations and perceptions, was adapted for use in the business-to-business environment (B2B). In the marketing literature there is little evidence of B2B research in relation to agency-client relationships, nor has there been significant scholarly work exploring the effect of the introduction of the Internet as a promotional tool on the agency-client relationship. The research undertaken in this study aims to respond to this gap in the marketing literature by addressing the broad research question: &quotHow will the introduction of the Internet as a promotional tool impact agency-client relationships?" Undertaking a review of agency-client expectations of the value of the Internet will ascertain whether gaps exist between agency and client expectations of the value of the Internet as a promotional tool. The discovery of gaps in the agency-client relationship in relation to Internet perceptions will indicate potential opportunities and challenges that need to be addressed by advertising agencies interested in extending their advertising services to embrace the Internet as a promotional tool. A major assumption in this inquiry was that gaps would exist between agency and client perceptions of Internet value. In particular, that advertising agencies would perceive the Internet to be a more valuable promotional tool than their clients. This assumption was informed from mass media and industry press, which indicated that advertising agencies were embracing new advertising creative in website design and strategic marketing activities using interactive media such as newsgroups and email to reach customers. However, the research of Bush et al. (1998) and Ducoffe (1996) suggests that little is known about the value of these Internet-based activities. Such thinking raises questions, such as: are advertisers feeling compelled to jump on the Internet bandwagon because of its popularity, or are businesses' desires to use Internet advertising a manifestation of Internet hype? To begin to answer these questions advertising industry stakeholders need to identify whether gaps do exist between agency and client perceptions of the value of the Internet as a promotional tool. The existence of such gaps could lead to tension in the agency-client relationship, which may ultimately mean a loss of client accounts for the advertising agency. Identifying and remedying such gaps could therefore aid in ensuring long-term and profitable working relationships with the agency's clients. To undertake this advertising industry research and respond to the research questions in this study an international advertising agency network, made up of 206 offices in 90 countries and a selection of their clients, were recruited to participate in the study. A two stage survey method approach was adopted because it was a time-efficient and affordable method for collecting detailed information from a dispersed network of professionals. The survey tool was a web-based questionnaire which was firstly submitted to a selection of advertising agencies within the international agency network. On completion of the questionnaire, agencies were asked to provide contact details for their top three billing clients. The second stage of the survey research involved the submission of a client questionnaire to the client contacts provided by the advertising agency. Both questionnaires used a modified SERVQUAL multi-item scale to measure service expectations. Discrete agency and client questions were also included in the respective questionnaires to situate the SERVQUAL analysis within the context of Internet usage, value perceptions and organisational characteristics (e.g. agency size, advertising spend, experience in using interactive media). The major finding of this study is that within the international advertising agency network there were no significant gaps in agency-client expectations concerning the value of the Internet as a promotional tool. Whilst several statistical analyses were undertaken, including bivariate and multivariate techniques such as Pearson's Chi-Square cross-tabulations, independent t-tests and ANOVAs, no statistically significant results are reported. In fact, it was found that advertising agencies and clients have similar expectations of the value of the Internet as a promotional tool. Gaps actually exist in relation to the clients who use the Internet as a promotional tool and agencies who supply Internet advertising services. Many agencies within this international agency network were found to be actively using the Internet, but their Internet advertising functions were not being provided by their traditional advertising agency. Descriptive analyses reported in the findings from this research study indicate that advertising agencies in this international network need to better understand their clients' Internet promotion needs. This will ensure the establishment of healthy, profitable and long-term agency-client relationships in the future. The research findings from this study offer advertising agencies worldwide insight into client expectations of the Internet, as well as other agency services. Furthermore, the findings reported contribute to the current small body of research in relation to B2B relationships in the advertising industry. The groundwork is set for future analysis of agency-client relationships in the advertising industry. In summary, while gaps between agency and client expectations of the value of the Internet as a promotional tool were expected, this research study found that agency and client expectations are quite similar. Analysis did reveal that one important factor, which influences the agency-client relationship, relates to the provision of Internet advertising services. Specifically, when an agency is not responsible for developing and maintaining clients' Internet advertising, these clients are utilising services from external providers of Internet services. These new stakeholders, who provide specialist services (i.e. graphic design houses, Internet advertising specialists and client's in-house Internet services), are changing the competitive environment of advertising services in the industry. Another interesting discovery, specific to the sample population, was that one third of agencies within the study did not provide Internet advertising services to current clients. However, these agencies have clients that use Internet advertising. On the one hand, this finding indicates that opportunities exist for these agencies to extend their service portfolio to embrace Internet advertising. However, it also raises an important question: that is, have these agencies created greater competition by not providing a full service communication portfolio for clients? These factors, and other methodological issues will inform directions for future research to explain the influential role of the Internet within the agency-client relationship in the advertising industry.