The article discusses the growing practice of principal media in the ad agency world, as highlighted by a recent report from the Association of National Advertisers (ANA). Principal media involves agencies investing in media at non-disclosed prices and reselling it to clients at a markup. Agency-holding companies seeking profit are increasingly using this practice.
Key points include:
- Principal Media Definition: Agencies act as principals by purchasing ad inventory from media vendors and selling it to clients, earning a profit margin.
- Forms of Principal Media: Agencies may purchase specific inventory units or commit to investments over time, often receiving discounted rates.
- Transparency Issues: Agencies do not disclose purchase prices to clients, raising concerns about potential conflicts of interest.
Industry Opinions:
- Jay Pattisall (Forrester): Agencies are driven by profit but should focus on what benefits the client's brand and audience.
- Cyd Falkson (MediaSense): Principal media can be beneficial if all parties are transparent and governance models are in place.
- Brian Wieser: Offers a detailed analysis of principal media forms.
Benefits & Risks:
- Client Benefits: Clients may get lower prices for premium inventory, but there's scepticism about agencies marking up prices without disclosure.
- Publisher Benefits: Media companies can attract new clients and sell inventory at discounted rates.
- Risk: Agencies take on financial risk by investing in media inventory.
- Contract Clauses: Clients can add clauses to ensure transparency and audit rights.
Agency Practices:
- Omnicom and Publicis: Actively pursue principal media and are financially strong.
- Havas Media Network: Emphasizes transparency, media quality, and flexibility.
- Crossmedia: Advocates for procurement-based buying with complete transparency.
Future Outlook:
The practice is expected to grow and evolve, with more clients demanding flexibility and risk-sharing from agencies.
Digiday concludes that principal media will continue to be a significant practice in the dynamic marketplace, with agencies adapting to client demands and evolving their offerings.
