‘Is principal media evil?’: Public clash over a divisive practice

I have no idea why this has become such a debate between indies versus holdco’s. Principal media buying is not evil, and it is only bad when it is done poorly or with bad intentions. When it is done well it should benefit everyone, the media owner gets a confirmed buy from an agency where the agency takes a principal position, usually for something they have purchased before for a client that likes the media/it has performed in the past. The agency takes the risk, the client doesn’t bear the commitment, and in my experience selling it for/to the holdco’s (outside of Australia across APAC and globally) – the deal will only be entered in to if they have multiple clients who use the media owner/format/space and they can genuinely diversify their own investment risk (of taking the principal position and often paying up front). So the media owner gets some surety of revenue, often up front payment, and often the ability to work more closely with the agency as some goals are more closely aligned. The client has to sign up to a specific agreement that says they will spend X on media that is principally traded by the agency, they often get visibility on where and what this is. The trade off for this is the client get a better price for media they have bought before, fully aware that the agency has taken a principal position, usually one they are not willing to take themselves, to get a longer term lower unit cost on media that works for them. The agency, who are actually taking risk that clients move, cut budgets, cashflows, bad/long payment terms and the like, get to make a margin. The media owner gets longer term guaranteed revenues.

This is like any real world/non-media investment, the party bearing the risk and making commitments gets to make a margin where they take the risk and if this is agreed and signed up to by all parties I am not sure where the boogeyman is hiding.

I think there needs to be a massive separation between the compliant way holding companies can trade principally where clients sign off on deals and are fully aware what agencies are doing, and the old practices of some of the holdco’s in programmatic where they buy the space, obfuscate their margins and just charge more for the same inventory in the name of “adding value” hidden as a “product” where they just mark-up media.

Painting it all as the same thing is simplistic and shows that people don’t understand what is actually being offered to clients and what they are buying in to no matter what geography they are in. Clients aren’t idiots, some like it, some don’t. Most of the multi-nationals and their very hardcore procurement teams know exactly what they are buying and why.