Media Management

ANA Report: The Acceleration of Principal Media

The ANA has published a new report looking into the increasing use of Principle Media.

To provide a comprehensive overview, Marketing Procurement iQ has published in full, the Executive Summary from the recent ANA Report, ‘The Acceleration of Principal Media’ in which the ANA says that principal media has been getting increased attention, and marketers need to be aware and knowledgeable.

The 46 page report can be downloaded in full using the link at the end of this article.

The ANA says that the purpose of the paper is to increase awareness and help educate marketers on principal media — the background, benefits, challenges, and guidelines — so they can make an informed decision about the role of principal media for them.

Increasingly, advertising agencies are now acting as principals rather than agents. That means they acquire media — therefore becoming the owner, or “principal,” of that media — and resell the media to their clients.

Changes in agency compensation models from marketers as well as pressure from marketers to extend payment terms and “drive media costs down” have led agencies and holding companies to accelerate the use of principal media.

Although principal media has been getting increased attention, it has been around for at least 10 years. The 2016 ANA-commissioned report “An Independent Study of Media Transparency in the U.S Advertising Industry” from K2 Intelligence notes it extensively. According to an auditor, in the past 18 months, “it has been seen everywhere.”

A fourth quarter 2023 article published by Digiday credits “a robust media buying business” for holding company growth. The article goes on to say, “The key takeaway here is that media often acts as the primary driver of growth for agency holding companies, perhaps because they derive margins from arbitrage around media buying.”

According to ANA research among client-side marketers:

• Only about half (48 percent) of survey respondents are “very familiar” with principal media. Meanwhile, 39 percent are somewhat familiar, and 13 percent are not familiar. This overall lack of knowledge is concerning.
• “Principal media is ubiquitous,” according to one survey respondent. Television and the open web are the most common media types. But other media and non-media are also used: digital walled gardens, audio, search marketing, print, influencer marketing, and research.
• About half (47 percent) of respondents have used principal media in the past year.Just over a third (35 percent) have not, and 18 percent — almost one-fifth — don’t know if principal media has been part of their company’s media activity in the past year. It is concerning that 18 percent of respondents don’t know.
• Forty-one percent of respondents expect to use principal media over the next year.I
• It’s more likely that larger advertisers, companies with a 2023 total annual U.S. media budget of $200 million or more, have used principal media in the past year (62 percent) than smaller advertisers have (47 percent). It’s also more likely that larger advertisers expect to use principal media in the next year (55 percent) than do smaller advertisers (34 percent).
• The use of principal media is increasing for 24 percent of respondents and staying about the same for 55 percent. The key reasons that the use of principal media is increasing:
  • Marketers are increasingly looking for greater efficiencies in their media buys.
  • Agencies are more aggressively recommending principal media solutions, often as a result of reductions in traditional agency compensation.
• The top benefit of principal media for marketers is reduced cost, followed by the benefits of better inventory and access to exclusive inventory not otherwise available. There was mixed feedback in our one-on-ones regarding the benefits of better inventory and access to exclusive inventory.
• There are challenges for marketers with principal media.
  • The top challenge is uncertainty if the recommended media is in the client’s best interest. Multiple qualitative interviewees had concerns about conflict of interest, and one specifically told us, “I don’t know if my agency is recommending principal media because it’s the best media for me, or the best media for them.”
  • Other challenges include loss of audit rights, lack of visibility on agency profit, and loss of quality in media placement
• Principal media was part of an agency pitch for about one-quarter (27 percent) of those that have done an RFP before engaging their current agency.

The Executive Summary goes on to say that It is imperative that marketers have guidelines for the use of principal media. Those guidelines should include:

• It is of the most importance to ensure that the contract with your agency is up to date with clear language to address principal media.
• The agency should be required to provide a clear business case detailing why principal media is recommended and is consistent with the marketer’s media strategy, objectives, and buying guidelines, and is in the best interest of the marketer. There should always be options presented that do not consist of principal media.
• Have a clear internal approval process for the use of principal media. Have your own media department (or alternatively, a media auditor should there not be an internal media team) evaluate the proposal for reasonableness and to see how it compares to historical and/or market pricing and any agreed-upon agency goals and KPIs.
• Final approval should be centralized with a single, senior-level person to coordinate the company’s total ongoing investments in principal media. Approvals should be done for each purchase in advance via a separate document or approval process.
• Require that principal media be clearly identified on media flowcharts. Do not accept vague language such as, “Principal media may be included.” Require specifics.
• If principal media will be part of your media strategy, consider a cap for principal media — that is, it will be no more than X percent of the total budget for a specific period of time.
• Auditing of principal media transactions should be allowed in the same way as for regular agent-based transactions. The only difference is that the agency would only provide access to the costs charged by the agency (or its affiliate as applicable) to the advertiser instead of the costs paid to third-party vendors.
  • Proof of performance metrics and access to transaction data should be made available for principal media with the same level of detail expected for agent-based buys. Those could include (but are not limited to) impressions, CPMs, outcomes, viewability, and IVT.
• Understand the impact that principal media would have on rebates that otherwise would have been earned under a non-principal media buy.
• Consider whether commissions or fees that would normally be paid to the agency for the management of agent-based transactions should or should not apply to principal media buys. Keep in mind that the agency will be making a profit through mark-ups on this purchase.

Report Contributors

The ANA report had input from the following contributors. Members of the ANA Media & Measurement Leadership Council; Keri Bruce, Partner, Reed Smith, LLP (Legal): Stephen Broderick, Managing Partner, Media Marketing Compliance (Auditing), Rick Gonzalez, Media and Advertising Assurance Services Leader, PwC US (Auditing) and Manuel Reyes, Founder, Cortex Media (Auditing)

Download the full 46 page report HERE