Commentary
Principal Media Is Growing -- Marketers Need To Take Action
- by Maarten Albarda , Featured Contributor, May 24, 2024
We should start by ensuring we all know what principal media is. Per the ANA: “Increasingly, advertising agencies acquire media — therefore becoming the owner, or ‘principal,’ of that media — and resell the media to their clients.” It is apparently most common for TV ad space as well as Open Web ad space.
The issues of your agency owning and reselling media space are, principally (pun intended), that they now may push inventory onto your schedule, or include it in its recommendations, because they own a lot of it. Are the media choices as presented to you driven by what you need, or what they need to get rid of? Kind of like the restaurant specials: Is the salmon special recommended because the chef was inspired to create it, or is it because the restaurant has a lot of salmon in the fridge?
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The larger issue is: Do you even know if principal media is included in your media schedule? Unless your media agency contract specifically stipulates disclosure of the use of principal media, and (better yet), pre-approval for inclusion of principal media, it is entirely possible the agency is already including its inventory onto your schedule.
Another challenge is that sometimes agencies hedge on advertising inventory they know will be in demand from their clients. So they buy up a good chunk of it, meaning that the only way you can get that inventory onto your schedule is by accepting the agency price point. That price is obviously set to benefit the agency. Had they not distorted the market by buying a lot (or all) of it, the price might have been different.
And that brings us to the final problem, which is closely related to the previous two points: Many agencies will prevent you (or your media auditors) from accessing or analyzing this part of the media buy. They do not want to disclose the actual cost, value or inventory to anybody outside of the agency.
Per the ANA study, there is more principal media being used by large advertisers than smaller advertisers ($200 million plus means you are in the large category). Mostly, larger advertisers also have pretty decent agency contracts. But it’s very clear that advertisers should ensure that their agency contract reflect (a) that full disclosure prior to plan inclusion is a must, (b) that the agency can show why the principal media component is included in the plan (and if that reason seems suspicious or nonsensical to you, you can tell them to leave it out!), and (c) that principal media is subject to the same media audit and post-buy rules as your regular media plans and buys.
The ANA has many more very useful recommendations, which you can find here. And if you want to fully geek out on agency contract terms and conditions, the ANA has an even more detailed contract template, reflecting this issue as well as a whole host of other hot topics such as AI, digital media transparency, production transparency, etc. available for its members. I cannot recommend application of these very relevant topics into advertiser contracts highly enough.
Well said Maarten.
The decline in transparency and planning objectivity is a major problem and a large component behind the reduction in the craft skills practiced by agencies.
If media agencies aren't objective, what are they? Media financial engineers?
This is at the forefront of the issues raised within the Advertising: Who Cares? movement.
#whocares
All true, but why is it so? One reason is the client's constant pressure on the agencies to lower their service fees. Another factor is the almost total lack of interest by CMOs and brand managers in the "boring" media function. Instead, the rely on accountants to monitor their buys. So it's a two -way street. One side trying to make a profit; the other paying little attention to the details. Clients also need to up their game.
Maarten, let's say that a big media agency acquires a TV "time bank" of millions of GRPs and decsides to resell it---or portions thereoff---to its clients, in the process assinging a CPM or CPP to the each transaction. Let's further say the the agency iinforms a client of this and the letter has no problem with the deal as after making comparisons with other possible TV buys the numbers as well as the contexts and other intangiables seem OK. What's so terrible about such a move by the agency---which is, an idependent company that is entitled to make a buck? And why must the agency tell the client exactly what its costs of acquiring the time bank were? So long as the client clearly knows what is going on why is that information any of its business? In like manner, why must a TV network disclose its programming, sales and profit margin on each sale to the buyer? like the agency, the media seller is an independent operator and such information is none of the buyer's business.
Ed: The key phrase in your comment: "So long as the client clearly knows what is going on why is that information any of its business". What the ANA has learned, and what I have seen in my practice, is that clients often do NOT know, or only know AFTER the fact. There was no choice for the client to determine if the proposed media inventory was a good idea, and there was no way to align on a cost that was mutually agreeable. There was no independent verification to establish if the recommendation befitted the client's strategy, or was in the agency's own financial interest. THAT is the issue the ANA is trying to address.
Fair, enough, Maarten. But isn't also true that advertiser brand management pays so little attention to the media function that they allow their media director---or associates---to sign off on every major buy and as these folks are not under tremendous pressure to ferret out cases where the agency seller fails to disclose its own involvement with the media those cases where transparancy is lacking often slip by. As for auditing, of course all media buys should be audited---but not to the extent of trying to find out the real cost to the seller of the media GRPs that were sold to the client. Determining if what was promised was delivered is fine;going beyond that isn't.
Hey Ed: my experience is that most, especially larger advertisers (who are the most 'vulnerable' to principle media, per the ANA) have typically very smart media teams in house. These media teams are on top of all the agency media strategy, planning and buys, and are the "go-betweens" for the agencies and advertiser brand management teams. While it is true that many companies often still chase "lower cost" or "efficiencies", I think it is unfair to state that (large) advertisers do not pay attention to the quality or direction of their media investments. Low cost or efficiency does not have to mean "crap". I agree with your auditor comment.
Maarten, the question about large advertisers paying attention to how well their ad dollars are spent---media buyuing, that is---is who at the advertiser is paying that attention. I maintain that its not the CMOs or brand managers but the "media" people at the advertiser and this is where the problem arises.