Principal-based media buying—how agencies can move away from the controversial model

Principal-based media buying—when a media agency purchases ad inventory in advance and resells it to clients, often with markups and hidden fees—is back in the news. While the practice has been around for more than a decade, adoption is growing as the media landscape grows more fragmented. Yet many are unaware of how it works and if it’s good for them. A recent study by the ANA revealed that 52% of marketers surveyed were only “somewhat” or “not at all” familiar with the practice. In principal-based buying, a media agency functions as a principal, unlike its traditional role as an agent. Such agencies say the approach can increase efficiency for clients, offering greater visibility and a higher volume of impressions. Some clients speak of short-term cost savings while marketing budgets remain under scrutiny. Where it gets thorny The truth is that such promises are impossible to verify without full transparency into spending. The concern with principal-based buying is that it can prioritize an agency’s financial gain over the client’s best interests. This lack of transparency can lead to biased media choices, excessive ad repetition and resistance to innovation—all while preventing brands from understanding the true costs of marketing efforts and their impact on the business. Check out the latest Ad Age events and award programs This model obscures the true cost and value of media buys, ultimately undermining trust and effectiveness between advertisers, brands and consumers. When leveraging principal-based buying, 74% of marketers cite a loss of quality in media placements with 76% reporting a lack of visibility on agency profit, according to the ANA. Clients can’t know if an agency is acting in their best interests or trying to offload unsold, potentially low-quality, inventory. Without transparency into what the agency has paid for the buy, it’s impossible to know. Also read: Inside agency review backroom dealmaking—why retail media commitments are creating tension Every brand is unique, with distinct goals and needs that media investments must address. When agencies engage in principal-based buying, the strategy often fails to serve the brand holistically. This can incentivize an agency to acquire emerging media sources such as retail media and influencer partners, allowing them to boost earnings through markups that don’t deliver additional value for the client. In such instances, retail media and influence partners aren’t pursued in the spirit of first-to-market innovation. Principal-based buying can also be detrimental to publishers, particularly smaller, diverse suppliers. They’re forced to lower their prices to compete. This pricing strategy not only undermines industry diversity but also shifts the focus from rewarding publishers for their impact on client success, audience reach, and market innovation to merely offering the lowest CPMs and maximizing profits for the principal reseller. Pursue partnerships and accountability instead There’s a better way to partner and drive lasting impact for your clients’ business—one that aligns the interests of agencies and clients alike. To achieve this, agencies should foster direct partnerships with platforms and partners. These relationships allow for agile, data-driven and audience-first media investments tailored to a client’s strategic objectives. When an agency embraces transparency, collaboration and co-creation, it ensures that media buys are effective and efficient, aligning brand messages and content with the right audiences at the right time. By avoiding third-party intermediaries and working directly with platforms that have proprietary consumer relationships, agencies can preserve the integrity of media investments and maintain privacy-centric, addressable relationships with consumers. Direct partnerships also drive innovation and secure cost-effective media placements that align with customer goals. Effective media buying isn’t just about big reach; it’s about engaging the right audiences in impactful ways. Increasingly, it’s about creating never-before-done media, creative and measurement integrations with publishers. NextGen Marketing Summit Join us for a crash course on Gen Z, DTC marketing and the creator economy Register today This approach offers clearer visibility into the pricing and placement of ad buys, removing hidden fees or markups that could otherwise diminish the value of the investment. While principal-based buying might offer short-term cost savings, a transparent, collaborative and client-focused approach ultimately yields better outcomes, both short- and long-term. It’s been only eight years since the industry was roiled by a scathing investigation by the ANA that found a “pervasive” culture of media kickbacks, rebates and other non-transparent practices. (Not to mention concerns about ad fraud and visibility.) Now is not the time to roll back our progress in narrowing the trust gap. Agencies can deliver superior value and effectiveness by shifting away from the principal-based model to one focused on direct partnerships and strategic media placements. Marketing should always inspire, engage and drive impact—and a commitment to transparency and collaboration is key to success.

Principal-based media buying—how agencies can move away from the controversial model

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