say no to

principal media buying

Brands should not engage in principal media buying without knowing all the facts

It’s time to confront the reality of principal media buying and its impact on your brand.

The practice of principal media buying has repeatedly prioritized one thing … profits. Too often, brands are in the dark about whether the media they’re paying for is best for their business or simply the agency's bottom line.

Principal buying causes systemic problems. On one level, the "break-out" or niche content from smaller publishers, where brands can find their customers, gets weeded out. On another level, pressure is placed on junior media buyers to steward money where profit is prioritized. They stop seeking and finding discrete media sources.

Technology won't reverse this quiet drain on brand performance. We simply need to stand up together and say enough is enough. Marketers need to ask more of their teams and partners. Demand to be shown that the media strategy aligns with your business goals, not just the agency’s need for margin.

Agencies need to stop sneaking in the back door with margin fixes and take the compensation issue head-on with clients.

After all, clients are already paying a negotiated "fee" for our effort and time. Hidden fees aren't part of the bargain.

Jared Belsky, CEO & Co-Founder Acadia

Resources:

What you should know and ask

  • 1 You are not alone. The ANA reports that ONLY 48% of marketers surveyed were “very familiar” with principal media, with 39% being only somewhat familiar, and with 13% being unfamiliar. In other words, more people do not understand what is going on than do. This puts you at a disadvantage. However, I share this so you also don't feel alone. It's hard to want to learn when you are made to feel silly. There is nothing to feel silly about. About a fifth of respondents in the ANA survey had no idea if principal media was part of their buy. The industry makes this complicated, so you don't ask questions. It's your right to be informed. In most cases, your media buy is one of your company’s top 5 expense items, so you are in the right to demand more information.
  • 2 Know what percentage of your total media buy is involved in principal media buying. If that percentage is large, by all means renegotiate your fee. The CEO of the agency might say, “Well, you are already getting a 3% fee on all media and that is very low.” You can say back confidently, “Well, it's not really 3% is it when you are making millions more via arbitrage and your real rate is maybe double if not more?” Just see what they say. A real partner doesn’t hide behind process and legal documents.
  • 3 Ask to hear more from the day-to-day team and less from heads of investment. Ask Sally, the 27-year-old media supervisor on your team, how and why she made her choices. When you hear her words, and listen to how she responds to your questions, you will start to get a sense of what is going on.
  • 4 Know that some large agencies are pushing principal media buying to cover other rising costs, along with pressures on fees. Their trading desks (aka, margin machines) went away, as have the one-time savings from T&E and real-estate footprint reductions after COVID. They countered with principal media buying when clients, tired of paying for bloat and crazy overhead, demanded fee adjustments. Brands, that is not your fault or your problem. The best way for agencies to blossom and profit sustainably is to get culture, compensation, resourcing, product/market/fit, and results right. That is what the agency industry should focus on, not finding loopholes to grab margin.
  • 5 If you are going to make an agency selection partly based on price/affordability, make sure you are comparing like things. There are times where the first-choice agency in a pitch is just a bit more expensive than the second agency. The second agency shows media rates and a fee structure that is a bit “too good to be true.” Well, understand that often, the way an agency can essentially “buy the win” is because things like principal media buying are going on, and they know they will get their fee on the other end. So, the ask here is to always make sure you are comparing apples and apples, not a banana and a lamp.
  • 6 The ANA report confirms the top challenge with principal buying is uncertainty over whether the recommended media serves the client’s marketing interest or just the agency’s economic interest. Multiple qualitative interviewees had concerns about conflict of interest, and one specifically shared, “I don’t know if my agency is recommending principal media because it’s the best media for me, or the best media for them.” Other challenges include lack of audit rights. Ask yourself: Do you have a trusted relationship when you are being told to stay in the dark? Is that right or fair to you?
  • 7 Brands should understand the total percentage of their plan that is composed of principal media. Brands should be allowed the same rights to rebates or discounts. Perhaps, brands could/should negotiate whether the percentage fee that is applied to all media should not be applied to the principal media portion. Why should anyone get to double-dip?
  • 8 Know that there are only a few situations where principal media buying might be okay-ish (and I stress “ish”) for a brand: 1) If you are getting a CPA/performance deal. 2) If you are getting savings that you know you can’t get ANY OTHER WAY (and you’d better be sure there is truly no other way). 3) If you are fully aware, fully comfortable, fully educated and have signed off believing it's the best option for all your shareholders.