Despite vowing to not be another person wading into the principal media debate, Mark Leone, partner at MadClarity, has donned his tin hat and jumped into the trenches to dispel the myths about the practice.
I vowed I wasn’t going to be yet another person writing about “principal media” deals. It feels like it is in the press almost every day. But here we are, I guess I couldn’t resist.
The potential difference is we have nothing to gain or lose by its existence.
Firstly, to clear up any confusion. These deals do exist in Australia. Their existence does influence agency behaviour. To suggest otherwise is misleading.
However, agencies making money from their clients’ money, beyond service fees, is not new. It existed before I started in the industry more than 20 years ago and has continued ever since.
Only two things have changed.
The first is the way it is done. The “model” evolved over the years, in line with what client procurement departments were looking out for. A high-stakes game of “whack-a-mole”.
The second change is more interesting. Client attitudes towards it appear to have softened.
Back in the day, hidden rebates were taboo. The mere suggestion they existed prompted most marketers to send in the procurement or compliance teams. This led to compliance audits becoming common practice, even if they couldn’t always find concrete evidence.
Why the change in attitude now? We put this down to two things.
Contracts now legitimise it. Opt-in clauses are commonplace in a “Client and Agency Holding Group” contract. It takes me back to year one of my economics and marketing degree, Caveat Emptor flashing brightly. Yet, most aren’t even aware they have opted in, let alone understand the implications. The appearance of “legitimacy” in a contract provides comfort.
Beyond this, the real reason is rooted in an age-old truth. Clients typically want a warm, friendly and collaborative relationship. Why wouldn’t they? Life can be tough in marketing departments. Agencies are trusted allies, even when they can’t be trusted.
I recently came across the following quote. I believe it was attributed to Thomas Szasz.
“The stupid neither forgive nor forget; the naïve forgive and forget; the wise forgive but do not forget.”
The context I saw it in had nothing to do with marketing or media. But elements of it ring true as I think about how attitudes have changed towards agency trading models. It is fair to say in marketing and media, we are prone to ignoring the past as we reinvent the new.
Principal media is the biggest incentive to date for agencies to place self-interest first. You can understand why some have been so focused on it. It has legitimised “playing both sides”. Some clients are even buying the win-win narrative. There is no downside for agencies.
Any remuneration model that allows a party to earn from both sides of a transaction is fraught with conflict. The Financial Services Royal Commission is an example that comes to mind. Within media, this fundamentally changes the relationship between client and agency.
Unless advertisers or media companies do something to stop it, it is here to stay.
So, what would I do if it was my money?
Firstly, I would not opt-in. Do the numbers yourself. You will see your potential reward is generally not worth the risk. If it is really win-win, you wouldn’t have to give up all rights.
If you do opt-in, there are two critical conflicts of interest that need to be addressed.
- Decisions on where money is spent cannot be influenced by the party selling principal media. The allure will eventually be too strong.
- You must get independent feedback on media pricing. You cannot rely on the one company that is both selling and buying to determine the “fair” price.
Would you prefer to be seen as wise, or naïve?
