Outcome-Based Pricing & Principal Media at ANA AFM
The ID Comms Breakdown
Outcome-based agency compensation and principal-based media buying are reshaping how big advertisers buy, measure, and govern media. Done well, they can sharpen incentives, unlock smarter pricing, and improve results. Done badly, they increase opacity, inflate risk, and undermine the very governance CMOs and procurement are supposed to protect.
At the ANA Advertising Financial Management (AFM) conference, David and I spent three intense days with the ID Comms team, CMOs, marketing procurement directors, and global heads of media. Over breakfast, coffee, lunch, and late-night conversations, three themes surfaced again and again: outcome-based pricing, principal media, and how to fix the pitch.
The mood at AFM was upbeat and collegiate. As David put it, there was a 'shared sense of purpose' among procurement leaders and a notably pro‑agency tone. Yet underneath the positive vibe sat a familiar tension: how do you reward agencies fairly, encourage innovation, and still maintain control, transparency, and audit-ability of tens or hundreds of millions of media dollars?
In this post we unpack the core arguments on #MediaSnack, connect them to what the ANA and 4As are publishing, and translate all of it into practical next steps for senior marketers and procurement.
Whats going on?
Three conversations dominated AFM:
- Outcome-based pricing and value-based compensation. Agencies are pushing hard to be paid on outcomes, not time and materials. This is not entirely new. Coca-Cola pioneered value-based compensation more than a decade ago, with upside margins reportedly reaching 30 percent when business goals were met, and much lower returns when campaigns under‑performed, according to coverage of its ANA conference presentation in WARC.
- Principal-based media buying. The ANA defines principal media as the practice where agencies buy inventory from media owners at bulk rates and then resell it to clients at a markup, effectively acting as media vendors, not agents. The ANA’s recent report on principal media found that only 48 percent of marketers say they are very familiar with it, while 47 percent have actually used principal media in the past year, and 18 percent do not even know if it is being used in their company’s media activity (ANA, 2024).
- Positive pitch principles. The ANA and 4As have jointly issued '10 Positive Pitch Principles' to make pitches more transparent, respectful, and effective. They advocate smaller shortlists, pitch stipends, and clearer feedback loops so both sides make better decisions (ANA & 4As, 2026).
What gives these topics such heat is the combination of scale and uncertainty. Agencies describe outcome-based pricing and principal media as business necessities. Procurement hears a seductive offer to 'only pay for success' or to 'get more media for the same money', but often without a robust explanation of risks, safeguards, and governance.
What are the implications?
For David and I, two implications stood out.
First, pure outcome-based pricing is operationally hard to execute at scale. Someone has to define the right business outcomes, agree baselines, and then wait long enough to see if results were achieved. In practice that often means deferring a large share of agency profit for 12 months or more. Publicly‑listed holding companies seldom have the luxury of waiting a year for their margin, unless the upside is extremely high.
Second, both outcome-based pricing and principal media can trade away transparency. When agencies ask to be paid solely on outcomes, they typically request more freedom to optimize across channels, platforms, and partners, often with looser audit rights. When they act as principals, they ask you to accept not knowing the original cost of inventory they resell to you. The ANA’s principal media report notes that cost savings of 10 to 15 percent are possible, but explicitly warns that conflicts of interest and governance gaps grow if marketers do not tighten controls (ANA, 2024).
For procurement leaders, that is an uncomfortable place to be. You are expected to be the guardian of governance while also being told that if you do not embrace principal media and outcomes you may be putting your agencies in 'financial peril'. My view is that this framing is far too simplistic. Advertisers carry almost all of the risk if things go wrong, from misallocated budgets to unaccountable black‑box buying.
How should marketers be thinking?
Our guidance to CMOs and marketing procurement directors is pragmatic rather than dramatic.
- Start by upgrading your KPIs before your payment model. Make agency scorecards more strategic, with clear links to the behaviors you want to see: better audience planning, higher‑quality reach, more effective creative rotation, cleaner supply paths. You can then bolt performance‑related pay onto those metrics, without leaping straight to a '100 percent outcomes' model.
- Use hybrid models with clear guardrails. Time and materials can cover basic delivery and overhead. Performance or value-based components can then reward genuine business contribution, tied to metrics that sit within the agency’s sphere of influence. That is the approach ID Comms has seen work consistently across categories.
- Treat principal media as an optional tactic, not a default strategy. Require agencies to demonstrate a clear value exchange for each principal proposal. If they earn higher margin, what exactly do you gain beyond a claimed discount? Better inventory, unique access, or genuine innovation can be worth it. Buying low‑quality impressions cheaply is not.
- Put governance in writing. Before you sign up to any outcome-based or principal model, lock in your audit approach, reporting cadence, quality thresholds, and caps on volume and share of spend. This is where marketing procurement earns its seat at the top table.
Ultimately, the lesson from AFM is not that outcome-based pricing or principal media are inherently good or bad. It is that you must enter these arrangements with your eyes open, guided by clear principles and strong governance.
Outcome-based pricing: promise and pitfalls for advertisers
Outcome-based pricing in media ties part or all of an agency’s compensation to business results rather than hours or headcount. In theory, it aligns everyone around growth. In practice, the market is now so complex that you risk both measurement disputes and a dangerous loss of transparency if you rush in without a roadmap.
We have designed, negotiated, and audited outcome-based and value-based compensation models for more than 15 years. Our view is that the concept is sound but rarely works as advertised when taken to extremes.
We point out three practical traps CMOs and procurement should avoid:
- Measuring what agencies can actually influence. It is tempting to peg fees directly to sales, app installs, or policies written. For some transactional categories such as travel, betting, or insurance this can be viable. But for many brands, media is only one of many drivers of those outcomes. When agencies carry accountability for metrics they cannot fully influence, relationships sour quickly.
- Budgeting for upside and downside. Finance teams need predictable accruals. Pure pay‑for‑performance models make it hard to estimate what agencies will earn, which can spook controllers and auditors. Coca-Cola’s early VBC pilots recognized this by capping upside and defining clear bands so finance could model likely ranges (WARC, via ANA AFM coverage).
- The transparency trade. To 'go all in' on outcomes, agencies often ask clients to relax auditing, relax channel‑level tracking, or accept black‑box optimization on certain platforms. Once those lights are turned off, it becomes difficult to spot waste, arbitrage, or misaligned incentives.
A more sustainable route, which ID Comms often recommends, is a hybrid compensation model:
- A base retainer or FTE structure for known scope
- A performance pool of 10 to 20 percent of total fees linked to strategic KPIs
- Clear, audited definitions of those KPIs, with both leading and lagging indicators
This approach allows you to reward agencies for genuine value creation while keeping enough transparency to govern effectively. It also recognizes the reality that agency profitability must be healthy for the ecosystem to thrive, without handing over a blank cheque.
Principal media, pitch reform, and what CMOs should do next
Principal media buying occurs when the agency becomes the seller of media rather than an agent. Agencies buy inventory at wholesale rates and resell to advertisers, capturing the spread. The ANA notes that some marketers see cost savings around 10 to 15 percent, yet many remain unsure if these deals are in their best interests (ANA, 2024).
My core concern is simple: when agencies are sitting on pre‑bought inventory, they will almost never allow themselves to be left holding it. If one client declines, that inventory is pushed somewhere else. Eventually, some advertiser will be encouraged to buy media they did not originally plan to use, in channels that may not be right for their strategy.
For procurement and media leaders, that creates three big questions:
- Is our agency advice still objective? When margin depends on shifting principal inventory, every media recommendation risks becoming conflicted.
- Can we audit what matters? Even if you can see where impressions ran and what you paid, you seldom know what the agency originally paid. Without that, you cannot judge whether the value exchange is fair.
- Where does accountability sit if it goes wrong? When spend is opaque and performance disappoints, the blame will not fall on the holding company CFO. It will land in the CMO’s inbox and on procurement’s desk.
Alongside principal media, AFM also shone a light on pitch behavior. The ANA and 4As '10 Positive Pitch Principles' recommend limiting RFP shortlists to three or four agencies, paying finalists a pitch stipend, and treating speculative work as the agency’s intellectual property unless it is purchased (ANA & 4As, 2026).
For media, we see these principles as part of the same governance story:
- Shorter, better‑designed pitches reduce resource waste on both sides.
- Stipends and clear feedback support healthier, more trusting relationships.
- Tighter briefs and realistic scopes reduce the temptation to make 'too good to be true' promises on pricing or performance.
At ID Comms, we coach advertisers to integrate compensation, principal media, and pitch design into one coherent media governance framework. That means being explicit about which buying models you will allow, under what conditions, and how you will measure both value and risk.
To discuss how this applies to your organization, get in touch to confidentially discuss your gameplan and options to protect your competitive advantage in media.
Frequently Asked Questions
Q1. What is outcome-based pricing in media?
It is a compensation model where part or all of an agency’s fees are tied to business outcomes such as sales, sign‑ups, or other KPIs, instead of hours or headcount.
Q2. Is pure outcome-based pricing realistic for large advertisers?
Rarely. Complexity, measurement lags, and finance requirements make fully outcome‑only models hard to sustain at scale, so hybrids are usually more practical.
Q3. How is value-based compensation different from bonuses?
Value-based compensation embeds performance into the core fee architecture, often with defined upside and downside bands, whereas bonuses are usually discretionary add‑ons.
Q4. What exactly is principal media buying?
In principal media, agencies buy inventory at their own risk and then resell it to advertisers, acting as media vendors rather than independent agents.
Q5. Why are CMOs worried about principal media?
Because it can create conflicts of interest, reduce pricing transparency, and encourage agencies to prioritise selling pre‑bought inventory over objective channel planning.
Q6. Does principal media always save money?
No. While the ANA cites potential 10 to 15 percent savings for some deals, those benefits can be wiped out if the media is low quality or misaligned with brand objectives.
Q7. What is the main question to ask your agency about principal media?
Tom and David recommend a single test: 'What is the benefit to us as the client, beyond your additional margin?' If the answer is vague, pause the deal.
Q8. How should we start introducing outcome-based elements safely?
Begin by tying a modest share of fees, perhaps 10 to 20 percent, to a focused set of strategic, measurable KPIs that the agency can directly influence.
Q9. What are the ANA and 4As Positive Pitch Principles?
They are 10 shared guidelines to make the pitch process more transparent and respectful, including smaller shortlists, pitch stipends, and clearer feedback.
Q10. How do these topics connect to media governance?
Outcome-based pricing, principal media, and pitch behaviour are all levers that shape incentives, transparency, and risk in your media ecosystem. Treat them as part of one integrated governance playbook.
Episode Transcript
Hello, I'm Tom Denford in New York. And I'm David Indo from London. Welcome to Media Snack Live. It's our weekly roundup of all the important news, and stories, and trends you need to know about the global media and marketing industry. In every show we ask, what is going on? What are the implications for advertisers? And what should marketers be thinking about next? Thanks for joining us, let's get into this week's show.
Hey, welcome back to Media Snack, uh, Live. on? LinkedIn, YouTube, and everywhere around the world. You're back in London, but we've, we- David and I have just spent three days together at a big procurement conference, and we're gonna talk about that today.
Yeah.
We're gonna talk about the, the ANA's, uh, advertising financial management conference, which is r- really marketing procurement and marketing finance conference, which is really good. We've been every year for more than 10 years, but it was your first... I say we- Well- ... as a company, but it was your first one- Yeah ... wasn't it? Yeah. What did you think?
It was, and I was... Um, obviously we had, we had Bill on last week, uh- Yeah ... previewing it and- Yeah ... uh, talking a little bit. So he gave me a little flavor as to what I was, uh, walking into. But I, I loved it. I really, really enjoyed it, and I say that genuinely. I've been to a number of, uh, procurement-focused conferences around the world- Mm ... and this was m- my favorite, and I enjoyed it. And, and I, I, um, uh, Richard Benyon, who- whose, uh, great kind of friend and kind of old colleague of ours, uh- Mm ... was there. And he- I saw a, I saw a comment that he made, uh, on reflection of the, the conference, and he said that, um, it was, there was a wonderful collegiate spirit.
Yeah.
And, and I, and I think he got it bang on, that there was, uh, this kind of sen- a shared sense of purpose- Yeah ... amongst the procurement community.
Yeah.
Which was very forward-facing. It was very, I think, very pro-agency in the most part. Mm.
Um, but it was, there was a lot of very progressive conversations going on, certainly- Yeah ... you know, around the, the coffee tables, and, and bits and pieces. But we'll unbundle, I think, a couple of the key topics, um, in this show.
Exactly. Exactly right. Um, yeah, it's good. It's one of our favorite ones. It's just got a vibe, hasn't it? It's a kind of funny thing 'cause, you know, you wouldn't- Mm ... it wouldn't, wouldn't, wouldn't imagine it's quite as kind of vibey as it is, but it's got- Yeah ... it's got a real vibe to it.
Yeah.
Um, right, so for those of you that if you're new to the show, this is Media Snack, where, um, David and I are founders of ID Comms, as we said in the intro, and we exist to kind of help protect advertisers, and primarily to get you really good at media. That's what we really want. And there's a lot of, there was a lot of media discussion, as usual, in, in procurement conference.
Um, so we were both there. We had three of our colleagues there, so it was five of us, and if you were there you probably saw us, walking around with our nifty little yellow bags. And I think we did breakfast, lunch, dinner, drinks, and everything else across three and a half days- Yeah ... which was a lot of conversation with marketing procurement leaders at some of the world's largest advertisers. Some of which are our clients, some of which we just know, some of which we're getting to know.
Yeah.
Um, and there were three, in our view, three conversations that were just kept coming up again and again. So we were kind of canvassing each other and our team, what are the three things? We're gonna talk about this on Media Snack. What are the three things that just kept coming up? And we all agreed, they were the same three things. So that's what we're gonna talk about today.
Um, and as usual, we talk about, you know, what's g- what is it going on? What's it about? Uh, what are the implications? And then w- maybe what marketing and procurement should be thinking about now. So let's, um, let's get straight into it.
First one is outcome-based pricing. So what does that mean? There's a lot, a lot of people talking about outcome-based pricing or outcomes.
Yeah, and it was, it was a, a, uh, it's around, uh, remunerating your agencies based on some form of, kind of business performance. Mm. Uh, so rather than paying your agency for time and materials, so the amount of time that they invest working on your, you know, client, project, process. This is about an outcome, so paying them for outcomes.
And I've been thinking a lot about this because I'm, by the way, I'm a big believer in the, in the, the, the philosophy of, you know, rewarding agencies for, um, enabling your business to grow. Um-
Which we've, done for years, haven't we? Like value-based compensation.
Well, exactly. And that- This is, kind of, I suppose some iteration of value-based compensation, but which we've- Exactly. That's- ... been advocating 15 years.
Yeah.
That's the point I've been... So Coca-Cola pioneered it, right?
Yeah.
Coca-Cola pioneered VBC, value-based, um, compensation 20 years ago.
Yeah.
So, you know, they were, they were rewarding agencies, or, or providing them with an upside based on kind of a, a proportion or a way of measuring kind of, um, upside in, in, in their kind of performance.
Yeah.
Now, you know, I think, I think, you know, the general conversation is, you know, can you, uh, pay your agencies in their entirety based on a form of outcome? So, you know, if they are truly in the game for you as a business, then why shouldn't all of their remuneration, their way, their compensation be kind of linked- Yeah. ... to kind of driving, uh, driving compensation? Uh, driving, driving growth for your, your business.
Yeah.
Now, the, the, the, challenge that we' have now, I think? perhaps from the, the challenges that Coca-Cola had, when they tried to implement this 20 years ago, is that the market is far more complicated now.
Yep.
Um, and- it is far harder, given the market nuances, to, uh, A, kind of, measure perhaps growth in performance or outcome.
Yeah.
Also, uh, it, and we're gonna unbundle this now I think, it allows for the agency to, to operate in a slightly different way-Uh, with the levers that they have in order to, to drive business growth, and that may or may not be in the br- the best interests of their client, of the client.
Yeah.
And I think that's the biggest challenge that we've got.
Yeah.
Yeah. Good. Okay.
Um, so yeah, we'll, let's, we'll think about some of the implications of that.
Um, one of the challenges, I mean, a lot... We, we've obviously been negotiating agency contracts for 15 years- Yeah ... or more.
Um, we've been putting in place these, what we think are quite progressive ways of paying agencies, and we're always, always open to... I'm always listening to agencies- Mm ... who, who, who- want to get paid on some deliverable or some kind of outcome or really the value that they create, but they've been stuck- Yeah ... in this time and materials world.
Yeah.
And so for years we've tried to create these hybrids that has, you know, pays them for their basic delivery and their service and covers some overhead, um, but allows them to earn or unlock more profitability through good performance, and some of that can be linked to the client's, uh, the client's individual business KPIs, as you mentioned.
Yeah.
Um, the... It's, the first thing I think is an implication, I think it's kind of weird that it's now, it's on all the stages, and I think that's by design. And, you know, viewers will know I'm maybe the slightly more skeptical or cynical of the two of us.
Uh, and, and, and maybe I go too far sometimes, but, so you can, you can kind of balance me out. But I think it's very much in the agency's interest that we're all talking about outcomes. I think they are lobbying for us to all be talking about outcomes, and, you know, the big agency kind of PR machine is pretty powerful. You know, it gets things on stage talked about.
And there. were some, there were some high-profile agency representations at this pr- marketing procurement conference. We had the, CFO of WPP- Yeah. ... with the CEO of Omnicom Media North America- Mm ... Ralph Pardo, and, a couple of others.
Um, outcome-based pricing is, was, a big message f- on both of those cases.
Uh, so they want us to be talking about it. Why do they want us to be talking about it? Well, one of the things that kind of comes hand in hand with outcome-based pricing, A, it sounds great. That's the first thing. So you... They want to sound, they want to be sound pioneering and inventive and commercially astute agencies, and so they come up with these things.
Yeah.
Outcome-based pricing.
Um, if you w- if you want to really hook procurement quickly on something, you could go basically say, "You owe me, only pay me f- based on success." That's a very, very, very addictive and seductive- Yeah ... message, isn't it, for pr- for procurement- Yeah ... to hear. And so it's a really good lead message for agencies. Outcome-based pricing.
Uh, so it sounds kind of good on, on the outside of the can. It, it's, it's sounds, uh, very tasty. Inside, though, the risk is, though, in taking an outcome-based approach, has a couple of implications.
Uh, the first, what we deal with is it's actually quite hard to implement. Okay?
Yeah.
So it sounds good, but it's very hard to implement, and it's highly unlikely that between an advertiser and an agency, they're gonna figure out a model. You know, and we've been looking at this for years, as I say, so we're pretty expert on agency payment models. It's very, very hard to pay purely on outcomes. A, it takes a long time to figure out what the outcome is.
Yeah.
So which means the agency doesn't get paid for a year. In our value-based compensation models, they're often giving a... You know, they, they're delaying their profit margin or a big chunk of their profit margin for a year until those results are known, and then they get paid. Most publicly traded companies aren't in don't have the privilege of giving away a year's kind of, uh, profit margin or deferring it, um, unless there was a massive upside to do so.
So one, there's a delay. Secondly, procurement, as much as they might want a good deal, they don't really like the, the not knowing. Okay?
Mm.
They like... They're finance-minded. They want things to be budgeted, accrued for, accounted for. They wanna know. They don't want a shock three quarters down the line that they've gotta write a big check for an agency that they hadn't necessarily anticipated. And great if that's been a wild success. That's not always good news for the business.
So there's some kind of operational big hurdles there, okay? Which mean that actually getting to pure outcome is gonna be incredibly difficult.
Our other additional concern is that if you're taking any kind of outcome-based remuneration, you're giving up transparency. That's really- Yeah ... the trade-off.
Um, it, the, it doesn't math as, as the, our Americans, uh, hearsay. I'm learning all these nice phrases. It just doesn't really math out.
Um, you end up losing something.
Um, they almost re- they will always require you to give up some or surrender some kind of audit right, uh, or financial transparency, and it might make sense for a couple of types of advertisers. If you're a purely transactional business, might work for, like, insurance companies or- Yeah ... you know, betting companies or things like, you know, things where you can just make instant commercial transaction.
Um, some, you know, we have clients in the, you know, in the, in the telecoms area where they have, like, direct, direct sales to, to business. So travel is another, is another good one.
Um, these are large categories. They might go, "Well, great. We'll hand over all of our money to an agency. We'll just only pay you on some major business KPI." You know, a transaction, a sale, an app install or a, you know, a new policy entered into, something like that, and then the agency might just earn a micro payment per- Yeah ... transaction, and then they do all the planning and the buying, and then you, as an advertiser, you just pay per customer.
Yeah.
Um, that's probably where they wanna get to. They wanna get to something like that.
Yeah.
But it just means that everything at that point between you and that sale is a black box.
Yeah.
That's, that's the big give up, and so-Uh, it is, it is a, it's an area which would be then ripe for abuse, I think.
Mm.
And it would be an area, as soon as we lose transparency, then we've seen in the media market, then effectiveness actually just ends up being eroded. And by the time you figure out that actually the agency didn't do a great job and the outcomes are not really what we expected, and this is ... We've spent all this money, and we're talking tens or hundreds of millions- Yeah ... of dollars. By next year, how are you gonna get your money back? You know?
Yeah.
That's right. It's too risky. It's absolutely too risky. So there's gotta be checks and balances.
Mm-hmm.
But anyway, that, tho- those, those are the big scary implications.
Yeah.
Um, couple of pieces of advice, David. What, what, what would be, what should we, what have we been saying to marketers this week?
Well, I think, I mean, as a good starting point is actually make the KPIs more strategic.
Mm.
So it doesn't necessarily ... You don't need to have to kind of directly leap to some form of, um, you know, growth metric. Just make the, the agency focus on some kind of key strategic KPIs- Yeah ... that you can kind of link performance to.
Um, don't double down entirely on, uh, outcome-based remuneration structures. Have a nice gentle roadmap that begins to allow you to kind of to test that and see how that kind of works. But, but the most important thing I think, is make sure that the agency is being measured on the strategic part. of their business and, how. they can drive what is in within their influence to- Yeah, ... hopefully then ultimately deliver against some sort of business growth.
Yeah.
That's the way that I would approach it' if I was a client now.
Very good. Very good.
Um, as I said, we, we engineer a lot of these payment models with agencies. They're tried and tested. We know, what works. We know what gets really good performance out of agencies.
Yeah.
There's no kind of silver bullet that's gonna suddenly transform these radically.
Um, but if you wanna talk about payment models, give us a shout because, um, I think we literally wrote the book on it, didn't we?
We did. We wrote ... One of the first things we ever did was we wrote a book- ... about agency compensation. Oh, my word. It was more of a pamphlet, but, you know- It was ... we now we call it a book. It's good.
Yeah.
And then we, we turned that into ... And then we did a big white paper with the WFA- Yeah, we did ... about agency payment models. And, and so, and it, it continues to be an area of interest because, you know, what gets measured gets done.
That's right.
And what gets scored for gets done first. So the payment model's a really, really important thing to get right.
Yeah.
Um, but outcomes, it's not, it's not the, it's not the, it's not the everything just yet.
Exactly.
Okay. Next, we have the other big theme that came up was principle-based buying.
Yeah.
Somewhat related to outcome payments perhaps, but another big industry kind of agency-led initiative.
Um, I'll just quickly introduce it- Yeah ... and I'm gonna pass to you- Please ... 'cause you can, you can kind of tell us, like, what, what actually- Yeah ... happened at AFM. But if you remember, so principle-based buying, if I just bring this up. We talked about this a month or so ago, right? ANA published a really, really good report. If you have not seen this and you are a market or anybody that touches media money, get this report. It's, like, 59 pages long, I think, but it's got- a really good exec summary, like five or six- Mm ... pages right, at the beginning.
Um, and we've already covered this. We'll just link to a previous show. We'll be doing more on principle media because it's a really big thing, but, um, this report came out, okay?
Uh, which led to my favorite headline of all time on Ad Age, which is, "More advertisers, are using- ... principle media. even though they aren't sure it's in, their best interest," which I think sums up an entire decade's worth of conversation around media- Yeah ... and particularly digital media. And the point that that makes in the, Ad Age making in the story, is that the insights are really good from this report. It's c- more money is going into this stuff, but advertisers are rightly a little bit cautious because they don't ful- feel, they don't fully understand it.
Yeah.
And that was one of the great- ... gifts that the ANA have made with this report, so, and it, which is a r- genuinely excellent piece of work.
Um, so this l- kind of leads us, then to, to AFM.
Um-
Yeah ...
and we spent a bit of time, didn't we? Just, you know, talking about this with, uh, with a whole bunch of advertisers and, and, and procurement leaders. But, um, yeah, tell us what happened, then I'll, I'll think of some implications on that.
Yeah. So there was ... I mean, this was a, a, a hotly anticipated session, uh- Mm ... on day two. And it was, um, it was delivered by a Forrester analyst, so Forrester Research, the, the very well-known, uh, research company that, that work with, uh, you know, many constituencies within our industry to conduct bespoke kind of research analysis.
Mm.
Um, and they're, they're highly reputable.
Um, and one of their analysts, Jay Pattison, uh, delivered this presentation, uh, on the state of principle media buying. Now, this is a, obviously a hot topic because everybody's talking about it. It, the industry's talking about it. We've talked about it for, for ages as well.
Yeah.
And, and procurement have to have a point of view on it because it is under their guardianship.
Yeah.
I would consider that principle media buying is, is something that they need to, they need to understand, that they need to have a clear point of view on.
Yeah.
So he was kind of preaching to a, to a, a, a very kind of eager audience, and it was controversial to say the least, I think, what he kind of said.
Um, it was a, a fairly, um, advanced narrative on the influence and the power of principle media. And I think he, he referred to it at one stage as a business necessity.
Mm.
Both for the agencies with which they, who, who operate with it, but also for advertisers to adopt it.
Yeah ...
you know, he, he brought out some kind of very interesting stats on the amount of inventory proprietary media that, that is happening. He did a, a traffic light system as to the type of platforms that are most adaptable to- Yeah ... to proprietary media. And then he did some kind of pros and cons.
Now, you know, the, the pros, in my opinion, felt a little bit forced. They were a bit soft.
Mm-hmm.
Whereas the kind of the negatives of it are, are, are well-documented, right?
Yeah.
We know that, you know, for those that haven't been aware of, of, of, of our position on proprietary media, proprietary media essentially is where the agency, um, invests their own money in securing a load of inventory at wholesale prices essentially.
Mm-hmm.
And then throughout the year they distribute that inventory to their advertisers where they make a significant margin.
Uh, and, and it works for the advertiser in that it's, it's probably good inventory, but the challenge for the advertiser, number one is that they, they can't audit it because n- no agency will ever allow an advertiser to know what price they paid for it.
Yeah.
Um, the other challenge, I suppose, is, so that's lack of transparency. You don't ever get transparency on that. The other challenge is if the agency are incentivized by generating margin- Yeah ... to, uh, use inventory media, then you could question that their advice and guidance is, is not entirely objective.
Yeah.
You know, because they're obviously kind of earning money from that. So- Yeah ...
so the, the, the downsides of proprietary media are quite obvious and, and, and, and kind of well-proven. The, the benefits of it feel a little bit kind of soft.
Yeah.
Um, and you know, that was, that was... it was an interesting provocative kind of speech.
But what he also said, which, which, you know, I'm, I kind of like- I'm gonna challenge. He seemed to suggest that for those agencies that aren't fully embracing proprietary media- Mm ... as a way of generating income for themselves, then they place themselves in, you know, financial peril.
Yeah.
And I think, you know, the, the link he used was IPG. He said, "Look, IPG perhaps wouldn't have been as primed for, uh, an acquisition if their financial position had been stronger- Yeah ... by investing or being more open to kind of proprietary media."
Yeah.
I mean, I'm not entirely- Yeah ...
sure that I'd buy that.
Yeah.
Uh, yeah, I don't buy that.
When, when, um, as you, as you can probably tell by watching this, I mean, David and I, you know, we do a little bit of prep, but we're not, like, scripted out or anything. But so, and often we just, you know, either the night before or the morning, the morning of, you know, we'll, we'll exchange some notes about, "Here's what I'm thinking about this." And I put some notes in about this session, and then David's first thing he said to me this morning was like, "You g- are you gonna be that aggressive about this?" And I was like, "Okay, maybe." But I would say to you, if you're m- if you're working in marketing or marketing procurement or media or anything and you want a, a slightly more aggressive version, 'cause I know David's used a word like it was a little bit, you know, controversial, uh, then I'll happily g- you know, I'll, I'll, I'll share with you kind of in pri- in private kind of, you know, my, my real feelings, but maybe that don't deserve to be on YouTube just yet.
But, um, yeah, I was, I was, I was disappointed, frankly. I, I think a bit... I'd read the report, the Forrester report, 'cause they published this back in February, so it actually came out before the ANA did their report. But the Forrester report was, uh, um, I mean, they did some of their own analysis, but it was a kind of vox pop as well across- Yeah ... the industry. They invited me to take part. I, I- Mm ...
I declined because I, um, I do have questions over their real impartiality.
Um, we don't really know what Forrester's commercial model is there, but the fact that they, they, they seem to sometimes represent very much the interests of a holding company's agency, or they, you know, at least they're providing a, this, a strong counterargument against, against the cynics like us perhaps.
Yeah.
Um, and maybe that's, that's Jay's job here, was, was to do exactly that. But he did seem to be promoting that not only that it was good for advertisers, that it's an inevitability, and that it, it benefits everybody. And so therefore, we just have to kind of move on. And that was his summing up, is like, "We just got to get over the fact that it may be controversial and stop whispering about it and, and saying it's a bad thing, and just get on with it." And, and I'm sure that's exactly what agency company, agency CEOs would love us to do. But however, it's our responsibility as advisors to the, to, uh, marketing, marketing procurement to say, "Look, here are some other implications." And I agree. I think the, the, the, the downsides or the pot- the risks is really what it is. It's risk management. That's the responsibility for procurement. The risks are actually quite significant things if they materialize.
Yeah.
Lack of transparency is not a good thing obviously, but you, we c- we get to audit principle-based media, by the way.
Mm.
Our company, we audit billions of dollars of principle-based buying or bought media. We just don't, obviously, don't know the acquired price of the agency- Yeah ...
so we don't know what their markup is. Okay? They're brokering media, arbitraging media, so we don't get to see the original price. We get to see the price that you pay as an advertiser.
Yeah.
And we get to see all of the other... We know what it is, where it appeared, the quality, the audience, all of that, and we audit it alongside all other paid media.
Yeah.
So it's kind of... You know, the agency will say, "It's mostly disclosed. The only thing you don't know is the price that we paid for it."
Okay, well, that's okay.
Mm.
That's fine. The risk, as you say, is that where those agencies are, are take- are make- feel like they're either making an investment or they're making a commitment. Some of them say, "Look, we don't take a financial risk," but we d- they do. They're making a commitment. They're kind of pre-committing to inventory. They then have to distribute that-So Jay Patsal stands on stage and says, "Well, advertisers don't have the risks then because if they don't wanna buy something, they just give it back to the agency." But you know what happens then, is that agency's gotta get rid of it. That's hot, this feels like hot stolen property at that point. Like, get rid of it. So some poor unsuspecting advertiser is gonna get suddenly a dump of inventory that they didn't want, that they've never used before- Yeah ...
and they're gonna be, you know, encouraged to use media channels or media inventory that they've... not in the right for the business.
Yeah.
I guarantee you no agency is gonna get stuck with inventory they can't sell. Do you know who's- Yeah ...
gonna get stuck with inventory that they don't want? Is the advertiser. That's the risk. The advertiser is 100 percent taking the risk here.
Mm.
You're taking the risk. You might get, you might get exactly the right media for a better price. That's the best-case scenario.
Mm.
Okay? In which case, there might be better ways to actually just try and get a better price for the stuff that really works, you know? Really focus on that.
The, the risk is you end up with a ton of stuff- Yeah ...
that you don't need, and you might be getting it cheaper, but it's just waste of money. It's just a- Yeah ...
absolute waste of money.
Um, there are some other implications. We're glad- we'll gladly in private kind of discuss some of these things. But we do, we, you know, as I say, we kind of audit this stuff a lot- Mm ...
alongside, um, alongside all the other media that we, that we do.
I must also just give a shout-out. We'll credit, um, credit absolutely where it's due. Some really good writing on this.
Um, uh, a couple of, uh, commentators, particularly, um, Nick Manning in the UK, who's done, done a lot of good work, who's, who's, uh, got, you know, he's got his real, a real bee in his bonnet about principle-based media and it, and it, and he's very articulate and, a- so he's written some nice pieces on that.
Yeah.
So there's a couple of things all, we'll link to. It's, it's, it's kind of required reading, I think.
Um, let's wrap that one up. What, uh, what should marketers be thinking, David? I mean, we've spent a lot of time this week- Yeah ...
with, like, dozens of brands. Billions- Yeah ...
of dollars worth of brands.
Yeah.
We've sat coffee, breakfast, lunch, dinner- Yeah ...
talking about principle buying. Just one question. One question. The one, only one question they should be asking their agencies is, "What is the benefit to me?"
Yeah.
"Why?" And that's fine. And if they can justify it because they're, uh, expressing the fact that it's gonna be cheaper, you can get more inventory for the money that you have, that it's gonna be amazing quality. Fine. Understand the value exchange. Okay? Because the value exchange to them is that they're gonna earn more money, more margin.
Yeah.
What is the value exchange to you as a client? That's the only question you need to be asking, and make sure that you're comfortable with the answer.
Yeah.
Yeah. Very good.
Um, we'll have- we're gonna do some specials on, on, uh, going deeper on principle buying- Yeah ...
because it's a, it's a, it's clearly the question that's bothering procurement right now, um, as we experienced this week and, and we've, uh, we've taken that debate forward, but we've got, there's more to do.
Um, the risk for procurement, and this is what we've said to some people i- kind of in private session, is you are supposed to be the kind of masters of governance.
Mm.
You know? The CMO is looking at you to go, "Listen, we're gonna do this stuff. You need to tell us whether to do it or not."
Yeah.
"You need to be comfortable," right? So if you're, if you're procurement and you're going in, your organization or your marketing org is going into this blind, or without the right safeguards, or without having set up the kind of stuff that we do, which is, like, the, you know, cap it, what are the quality parameters, how are you gonna measure it, all of the principles, the toolkit to kind of go do it, the danger is if there's, if this blows up, it's gonna come back to you.
Yeah.
You know? I'm not, I'm not seeing CMOs in the future going, "You know what? We tried it. It was worth it." They're gonna be saying, "We're looking at procurement here. Our governance leaders, our governance partners here. What on earth are we doing?"
Uh, I would... Y- um, read the Forrester report by all means, but I would say read the ANA report three times afterwards to kind of cleanse yourself- Yeah ...
um, and find out what's really going on.
Mm.
Super important.
Okay. Final one. This is a quick one, 'cause we're actually gonna do this as a full show- Yeah ...
next week. Okay?
Um, the ANA and the 4As t- have teamed together to create some really nice guidelines for- Yeah ...
pitch best practice, right? Which is stuff, again, we know, we spend a lot of time talking about.
Um, yeah. Okay. So tell us about those. 10 things-
So they, they posted, uh, a, a, a really good presentation on 10 things that ev- that every pitch gets wrong. And so these are kind of, you know, 10 guidelines.
Um, they, they incorporate all pitching, so creative, PR, and media.
Yeah.
And so there's obviously nuances depending on the, kind of the discipline and, you know, we'll cover all of these 10 kind of principles next week, but we'll kind of give it a media spin as we always do.
Um, but they were really good and they had some great panelists, not least Donna, who is our regular viewer, and she was, uh- ... she was very passionate and, and, and, and very insightful in kind of key areas. But this is it. You're running a pitch. It's really, really, really important, uh, for all parties involved, and following at least these kind of 10 principles is a really good start.
Yeah.
And we'll cover them next week.
Yeah, exactly.
Excellent.
Um, good. Okay. Well, bang on time. I thought we would spent a lot of time on those two meaty things first- Yeah ...
and then, you know, cr- and credit to the ANA and the 4As for producing yet another set of really good guidelines.
Yeah.
Thanks again for the collaboration there. We're gonna go deep on it next week.
Um, in the meantime, go to idcoms.com, uh, to pick up on any of these stories that we'll have a, uh, some blogs up there about principle buying and, and, uh, all the other fun stuff that keeps us busy. But we drank a lot of coffee over these things, didn't we?
We did. We did.
Good. Okay, mate. Uh-
All right ...
have a good weekend everyone, we'll see you next week.
See you next time. Thanks for watching Media Snack Live. If you found it helpful and want to learn more, head to idcoms.com to get more tips, tools, and resources to help you get good at media. We'll see you next week.
COMMENTS