Given the changes in the advertising world concerning media buying over the past decade, it is somewhat surprising to see that in a recent survey, nearly 40% of client-side marketers said they either have not updated their media buying agency contracts to address principal media, or do not know whether they did.
After its extensive 2016 report on media transparency, the Association of National Advertisers (ANA), a trade group made up primarily of brand advertisers, has been following up with sample contract templates, reports, surveys, and other useful tools to assist with the contracting process between media buying agencies and brand clients. Recently, the ANA released the results of a new survey it conducted about media transparency, which reflects both progress and continuing concern.
While a majority of surveyed marketers reported updating their media agency agreements within the last two years, significant percentages indicated that their contracts still do not expressly address principal media transactions, rebates, or other non-transparent services. The ANA concluded that transparency remains a meaningful issue for many advertisers and reiterated its long-standing recommendation that advertisers regularly review and update their media agency contracts.
Link to Why Principal Media Requires Contract Clarity Why Principal Media Requires Contract Clarity
It is beneficial for both advertisers and agencies to specifically address principal media buying in their contracts. In a principal media arrangement, an agency purchases advertising inventory for its own account, where it owns the inventory and is directly liable to media companies for payment, and then resells that inventory to its advertiser-clients. Contrast that with the traditional media buying arrangement where agencies purchase advertising inventory on behalf of brand clients rather than for themselves, only at the time the brand clients are looking to place ads. In this traditional arrangement, sequential liability applies: agencies are obligated to pay media sellers only after receiving payment from the brand client, and media sellers must look solely to the brand client for payment if the agency has not been paid for the advertising space.
Link to Benefits and Risks of Principal Media Benefits and Risks of Principal Media
Principal media buying turns the agency into the principal buyer of the advertising space, and an provide legitimate benefits to both the brand clients and the agency. Agencies may leverage scale, expertise, and risk-taking to secure inventory that might otherwise be unavailable or less economical, while advertisers may benefit from guaranteed placements, operational efficiencies, or favorable pricing. At the same time, because the agency acts as both seller and service provider, principal media transactions can create questions regarding pricing transparency, markups, incentives, and the allocation of risk. The key issue is typically not whether principal media is permitted, but whether the parties have clearly agreed on the rules governing its use.
Link to ANA Survey Reveals Ongoing Transparency Concerns ANA Survey Reveals Ongoing Transparency Concerns
The ANA’s survey suggests that many advertisers remain concerned about transparency in media buying, with principal media identified as the most frequently cited area of concern. Respondents also highlighted issues involving limited information sharing and lack of detail regarding agency practices. Notably, although principal media has been a subject of industry discussion for years, only 61% of surveyed marketers reported that their contracts specifically address principal media and other non-transparent services.
It is not uncommon for brand client and agency contracts to go back 10, 15, or even 20 years, supplemented by various amendments and addenda. Given the massive changes in the industry and technology over that time, however, updating contracts with specific terms can help avoid disputes while allowing both parties to capture the benefits of evolving media-buying models.
Link to Updating Media Agency Agreements for Modern Practices Updating Media Agency Agreements for Modern Practices
Updating contracts benefit agencies by preserving the flexibility to offer innovative services while ensuring that clients understand the nature of the services being provided. For brands, the contract should clearly define the parties’ expectations regarding transparency, regardless of the compensation model being used.
Contract provisions should address topics such as disclosure obligations, ownership of rebates and incentives, use of principal media and other non-transparent services, audit rights, reporting requirements, and the degree to which underlying costs or markups must be disclosed.
Given the evolving media buying landscape, as well as technological advancements such as the increasing use of artificial intelligence, proprietary data, and alternative inventory models, the importance of updating contractual protections to address modern concerns will only increase. Media agency agreements must be updated to accurately reflect current business practices and adequately address expectations.
Agencies likewise may benefit from reviewing legacy agreements to ensure that newer service offerings and compensation structures are appropriately documented. The ANA’s latest report serves as a timely reminder that transparency is not a one-time compliance exercise but an ongoing contractual and business governance issue.
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