• by Joe Mandese , 3 hours ago

"And that's not a sustainable chart," the 4As' Matt Kasindorf concluded, using his hands as the best gestural Cartesian coordinates I've ever seen (see above) to make a visual point during an the Media Town Hall discussion about principal media-buying -- and other forms of non-disclosed agency media dealing -- during the closing session of the Association of National Advertisers' Advertising Financial Management Conference in Orlando Wednesday.

The town hall, moderated by departing ANA Group Executive Vice President Bill Duggan, capped off a week of presentations, discussions and competing charts covering a wide range of advertiser finance, procurement, and agency services debates focusing largely on media -- and secondarily, the emerging, disruptive nature of AI in advertising and media services.

"Media is the biggest spend for many marketers," Duggan said while setting the town hall up, noting that media has supplanted old school agency compensation debates as the biggest discussion point and for good reason.

"If you look at the total [agency services cost] pie – 100% – agency compensation might be 10%, production might be 10% and media 80%," Duggan explained.

With that, he kicked off a lively debate about the role media is playing as a new form of agency compensation, principally "principal media" buying services in which an agency acts as the principal owner of media and resells it to its advertiser clients vs. acting in their historic role as their clients' media agent.

Noting that agencies have a right to be compensated fairly for servicing their clients, Duggan noted the main argument for reselling -- and marking up the cost of media to their clients is, "I can get it for you cheaper this way.

"On the other hand," he added, "one of the challenges is conflict of interest. How do you know if the agency is recommending certain media to you because it’s teh best media for you, the client, or the best media for them, the agency?"

And that paradox -- whether principal media is a better deal for clients or for agencies -- occupied most of the rest of the town hall debate, which was dominated by clients, consultants and media auditors. And while no agency stepped into the fray, the 4As' Kasindorf provided his members' agency-side perspective that there is no such thing as a free lunch, ad campaign or media buy.

Clients were not so sanguine, citing the lack of transparency in agency relationships with the media, including various acronyms and business compensating agencies with free media credits that they could effectively resell to their clients at 100% profit.

"That’s where the entire conflict of interest also starts," asserted media auditor FirmDecisions' Managing Director North America Ardit Bejko, adding, "There’s this feeling from an advertiser’s perspective that you are being sold stuff twice and that maybe you are being sold stuff twice and that this is probably media that maybe another peer of yours or a competitor of yours actually deserves to get back."

Bejko said the biggest problem with that model is that agencies have failed to prove that they have "taken the risk" -- via their own capital or otherwise -- to justify the free media inventory they resell at a mark-up to their clients.

Speaking on behalf of the agency-side the 4As' Kasindorf explained the problem by recalling an unnamed advertiser procurement executive's explanation of the paradox in a previous ANA conference.

"I don't love it and I don't hate it," the unnamed executive said, adding that principal media can be "really useful" in dealing with the pressure her financial team puts on marketers to cut agency fees altogether.

"So she went to the agencies and said, ‘How else could you be compensated?’” And they said, ‘Well, we can be compensated through non-disclosed media, maybe principal media.’ And she said, ‘Alright, let’s talk about how much of it.'," Kasindorf recalled, implying that the profits generated by agency principal media-buying offset the cuts in agency compensation fees.

*Generated by Gemini Pro using this column as a prompt.