PRINCIPAL MEDIA: SUPPLY AND DEMAND IS BEING DOUBLE CROSSED BY HOLDING CO´s

The Shift to Principal Media

Principal media isn't a new concept, but its adoption has accelerated dramatically in recent years. This shift has been driven by evolving agency compensation models and the relentless pressure on marketers to cut costs. Agencies claim this model offers savings and exclusive inventory access, but the reality is far more complex—and damaging.

In the evolving world of advertising, a seismic shift is occurring under the radar. Principal media, where advertising agencies buy media inventory and resell it to clients at a markup, is quietly transforming the industry. While much of the focus has been on the consequences for advertisers—higher costs, reduced quality, and lack of transparency—there's another side to this story that is seldom discussed: the profound impact on media sales houses. This article delves into these hidden costs and highlights the emergence of a new post-digital breed of industry leaders like Koen Smeets, Gordan Domlija, and privacy advocates such as Sergio Maldonado who are bringing a fresh, balanced approach to the landscape.

Consequences for Advertisers

Before diving into the lesser-discussed impacts on media sales houses, it's crucial to acknowledge the significant drawbacks for advertisers:

• Higher Costs and Lower Quality: Advertisers may face increased media costs due to agency markups and the purchase of lower-quality inventory. The anticipated savings often do not materialize, leading to inefficient media spending.

• Lack of Transparency: Principal media transactions' opacity makes it difficult for advertisers to assess the true value and performance of their media buys, complicating strategic decision-making.

• Diminished Agency Accountability: Agencies controlling both buying and selling reduce accountability, prioritizing profit over campaign effectiveness and integrity.

THE UNTOLD Consequences for Media Sales Houses

While the above issues are widely recognized, the significant impacts on media sales houses remain underexplored. Here's a closer look at the hidden costs for these crucial intermediaries:

Loss of Traditional Revenue Streams

Media owners and sales houses, traditionally intermediaries between advertisers and media agencies, are being sidelined. Agencies now negotiate directly with the media channels, bypassing these crucial middlemen and erasing the value of their knowledge which was largely remunerated through client satisfaction and success-based commissions and fees. This direct buying model significantly impacts the financial health of independent and smaller sales houses well known for their relentless commitment to service, problem-solving, and focus on long-lasting HUMAN relationships with agencies and clients alike.

Reduced Media Quality and Transparency

The promise of cost savings often comes at the expense of quality. Principal media deals frequently involve bulk purchases of lower-quality inventory, excluding premium spaces. This reduces the quality of available media and obscures the true costs and placements from advertisers, eroding trust and transparency.

Mid-size clients, challenger brands, newcomers, and local champions across industries are, by large, those who pay the price of this model, with any potential savings from their “tier 2” investment in media often being used to reduce prices for the heavyweight, procurement led Tier 1 flagship global clients.

Erosion of Trust and Conflicts of Interest

With so-called “agencies” serving as both buyers and sellers, conflicts of interest abound. Agencies “might” prioritize their profit margins over their client's best interests, leading to decisions that benefit the agency at the expense of campaign effectiveness. This dual role fosters distrust among media owners, sales houses, and advertisers, complicating relationships and negotiations.

Increased Market Consolidation

The concentration of buying (and reselling power) among a few large holding companies diminishes competition, giving these entities undue influence over media pricing and availability. Smaller sales houses find it increasingly challenging to compete, leading to a market that leans towards monopolistic practices.

Principal-based media only exists to make media agency groups more money.

Sales Houses at Risk

Sales houses most at risk include those that have traditionally worked with publishers now selling inventory directly to holding groups. The impact is especially severe for:

• Independent Sales Houses: Without the backing of larger media conglomerates, independent sales houses are losing their edge in the face of consolidated media buying/reselling power.

• Regional and Local Sales Houses: These entities, which rely on local relationships and specialized services, struggle to compete with the centralized reselling strategies of holding groups.

• Specialized Sales Houses: Sales houses focused on niche markets or specialized media find their valuable inventory less attractive to holding groups that prefer broad, volume-based, generalized media buys and reseller agreements.

• Digital Media Sales Houses: Digital sales houses, particularly ad tech (not to be mistaken with Big Tech) specializing in programmatic and performance-based advertising, face significant risks as principal media commoditizes digital inventory, undermining the role of these sales houses in optimizing campaigns and ensuring brand safety.

The New Post-Digital Breed: A Balanced Approach

Amidst these challenges, a new wave of industry leaders is emerging. ReMotive Media and pioneers like Koen Smeets, Gordan Domlija, and others are spearheading a post-digital era characterized by neutrality, transparency, and mutual benefit for clients and sales teams. Unlike the major holding groups, these leaders are committed to a balanced approach that puts big ideas, strategy, and planning based on trust, quality, and fairness first.

The principal media model adopted by major holding groups poses significant challenges for media owners and sales houses. The erosion of human relationships, lack of trust throughout the value chain, reduced media quality, and market consolidation require urgent attention to ensure a balanced and fair media ecosystem.

As stakeholders navigate this new landscape, advocating for honesty beyond transparency and equitable practices is crucial to protect all parties involved.

Industry heavyweights such as Nick Manning and Brian Jacobs are examples of outspoken experts in the field denouncing this practice. At the same time, the emergence of a new post-digital breed of agencies, such as ReMotive, offers a hopeful contrast to the monopolistic tendencies of traditional holding companies, promising a brighter future for the industry.

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This article touches only on the tip of the iceberg of a problem rooted in knowledge sharing and conservation towards best practices and competitivity that threatens the continuity of the brands paying for these services.  Happy to discuss more, be challenged, and listen to other opinions that build and improve upon these thoughts.

Thanks for reading: comments/contributions/additions are very welcome!