Media Buying Briefing: Debating the pros and cons of principal media

Analysts including Brian Wieser cite principal media as an important reason both Publicis and Omnicom are currently among the few agency darlings of Wall Street. “Principal buying will become increasingly important with every passing year,” wrote Wieser back in May right after the ANA issued a report on it earlier this year that showed how little is known among marketers about principal media. “Towards those ends, ensuring that marketers have learned as much as possible about the topic will prove to be helpful for those marketers and for the agencies who service them.”

The thing that has many in the industry up in arms is the lack of transparency at a time when a lot of the communications business is under fire for the same reason—lack of there of. Besides the ANA report, a number of columnists and observers expounded on LinkedIn about the evils of principal media, including ex-Ebiquity and Medialink exec Nick Manning, who passionately described his belief that the practice is dirty and dark. 

Steve Boehler, founder of marketer and agency consultancy Mercer Island Group, is among principal media’s detractors, citing a number of reasons, which include agencies no longer acting in clients’ best interests but rather their own — including intentionally obfuscating the practice in master service agreements with clients. 

“The minute an agency is able to take the word ‘agent’ out of a contract —and then not act in the best interests [of the client] — then it’s clear whose interests they’re acting in, and it’s their own,” said Boehler. “That opens up this Pandora’s box of all kinds of strange behavior. … So the real question becomes an overt question of trust, because there’s so much that the client can’t know now about what’s happening at the agency. Are you really acting on my best behalf? If you are, why can’t you just say that in your contract? And if you can’t say it in your contract, what the heck is going on?”

And yet more agency holding companies are adopting principal media because, well, it makes them money. In its Q3 earnings call in late October, IPG announced it plans to get deeper into principal media, even though its barter arm Orion is already in that business to some degree. 

“Our principal buying solution is purpose-built for the current media ecosystem, meaning that it’s an offering that includes the full range of inventory options, including connected TV, social search ads, retail media and other digital media formats,” said IPG CEO Philippe Krakowsky during IPG’s Oct. 22 call with analysts. “We’ve put in place the necessary guardrails to exclude low-quality inventory. It’s a bit like the skinny bundle approach taken by certain media owners to get consumers all the content they need with advantageous pricing. This strategic approach gives us the ability to drive value for clients while also ensuring we can meet the needs of marketers who operate in highly regulated industries, and those that place a higher value on brand safety.”

Ironically, it’s the holding companies — those with the giant clients that spend more than $1 billion in marketing — that have to worry least about any blowback from those clients, noted Boehler. Why? Those clients are so large, they’re privy to the margins that the agencies are making in principal media, he argued. 

The rest of the marketing world — and that represents thousands of marketers — should be asking their agencies a lot of questions, he said. “Clients should ask questions like, does the MSA [master service agreement] explicitly require that the agency act as my agent? If not, then it’s buyer beware. Does the contract have audit rights over what was purchased on my behalf and what the agency actually paid for the media? Because if I don’t know [that] then how can I trust it was the right buy for me? Is the agency obligated to disclose and provide direct pass-through to me of the rebates or savings or other incentives that the agency is getting that relate to my spending?”

Kamran Asghar, CEO of Crossmedia, spoke out against principal media onstage at the recent Digiday Media Buying Summit by pointing out that agencies have no business being “doctor and pharmacist,” as he put it. “When the economics drive your business toward favorable positions in the marketplace, that’s where there is a conflict of interest.”

Given that the ANA report found that a majority of marketers didn’t even know that principal media exists, there are questions to be asked. But there’s a counter-argument that goes beyond the media agencies’ complaint that procurement has whittled down any chance of profit by reducing commissions on planning and buying to nothing — agencies are notorious for taking on loss-leader clients for vanity in hopes they can make it up elsewhere. 

That counter-argument questions why agencies need to disclose their margins to clients when so few other industries do. One ad tech executive who works with agencies all the time, said he was explaining principal media to a colleague who’s not in marketing or media. 

“I told him that in our industry, typically the agency has to disclose their margin, but they’re starting to come up with these business models where they don’t disclose margin,” said the exec who declined to speak for attribution. “My friend was like, ‘That sounds like a real business.’ Think about it: we typically don’t get to go [to a restaurant] and ask people what they paid for the beef and the hamburger.

The exec said clients are just focusing on the wrong part of the problem. “The metrics that [media agencies] are using around these products are easily gamed,” he said. ““Principal media is a good business model. It’s just that that advertisers are using the wrong metrics to hold agencies accountable when they’re buying principal media,” he said. “If you’re going to hold them accountable, then make them accountable to media quality.”

Color by numbers

Heading into the final weeks before Christmas, Hannukah, Kwanzaa and yes, even Festivus for the rest of us, how is the luxury goods category faring? Brand performance researcher LoopMe surveyed 5,377 U.S. consumers in August 2024 to gauge consumer behavior and preferences around luxury goods and apparel. The topline finding: 70% of U.S. consumers will make a luxury goods or apparel purchase each year, with one-third of those spending at least $1,000 — and most of them want to make that purchase in a physical store. It’s all apparently in the spirit of “treat yourself” every now and then. Other stats: 

• Price (50%) and quality (47%) of luxury items are key factors when making a luxury purchase, across all budget levels;
• 54% will buy luxury goods for a special occasion or as a reward for personal achievement, while 30% will buy in a sale;
• 16% will buy regularly as part of their lifestyle, while 13% will buy for the holiday season.

Takeoff & landing

• Havas put out a prospectus to signal its formal intent to be traded and listed on the regulated market of Euronext Amsterdam, in a planned spinoff from parent company Vivendi.
• It’s been a year for women’s sports, which is in part why GroupM announced in March that it planned to double media spend across that spectrum over the span of a year. Last week the WPP-owned media network said it had already reached that goal, citing 20 or so clients that increased their investment. 
• In the never-ending effort to reduce carbon emissions, Horizon Media last week partnered with programmatic vendor TripleLift to offer net-zero carbon emissions for all Horizon Media buys through TripleLift’s inventory, using Scope3’s Green Media Products. 
• B2B specialist agency Gravity Global acquired Denver-based social media agency VOCO, to help grow Gravity Global’s organic social media capabilities.
• Account moves: Independent performance and brand shop Within landed media AOR duties for Onewheel single-wheeled electric skateboards … NP Digital won media AOR duties in strategy and planning for Mitsubishi Motors Canada.

Direct quote

“DEI is evolving, but we are not pulling back … DEI is a key component that helps us win; it fuels our business. We have the board’s total commitment … DEI is core to all we do … Omnicom is not backing away from DEI.”

— Omnicom CEO John Wren, in a recent internal speech.

Speed reading

• Antoinette Siu examined why creator and influencer agencies are being cautious in these last days before the presidential election by pulling back their creators (and their clients) till the dust settles — and who knows how long that will take.  
• Krystal Scanlon dug deep into the progress made — and the challenges still ahead — for X’s relationship with advertisers  two years into its ownership by controversial business magnate Elon Musk. 
• I wrote about attention metrics firm Adelaide becoming the first pure-play attention provider to get into the MRC’s accreditation process.