WTF is principle-based media buying? And should you care?

So I’ve been seeing the term “principle-based media buying” pop up a lot lately.

Obviously, my initial reaction was, “Oh sick, another industry buzzword designed to keep marketers on their toes.”

And, after some research I’ve decided, sure, it is most definitely the latest buzzword to make its way into our psyche.

But unlike some fleeting jargon, this one actually has substance.

So, in plain English for my people in the back, what is principle-based media buying?

At its core, principle-based media buying is kind of a glorified version of arbitrage.

It’s when a media agency buys media space at a lower rate and then resells it to their clients at a higher price. This is a classic “buy low, sell high” move—except it’s happening with ad space, not stocks.

Agencies pocket the difference, creating a new stream of revenue while still playing the middleman between clients and media outlets.

Sounds like a sweet deal, right? Well, like most things in marketing, there’s more to it than meets the eye.

After all, it’s not all rainbows and profits for everyone involved.

How it works – if you’re into that sort of thing.

Media agencies secure media inventory at a discounted rate from publishers, platforms, or networks.

Basically, they’re getting it at a cheaper price because they’re buying in bulk or negotiating a deal. Then, they resell it to clients at a higher price, typically by bundling various media placements or offering specialised packages.

The beauty of this model is that it’s flexible.

Agencies can play around with how they structure deals. This means they can offer clients unique combinations of media across different platforms or timeslots. For the agency, it’s all about getting creative with pricing and packaging to maximise that sweet mark-up.

But (and yes, there’s a but), said clients often don’t know they’re paying that premium price. And therein lies the controversy.

The benefits of principle-based media buying:

Extra cash for agencies (obvs).

Let’s be blunt: media agencies are always looking for new ways to pad their bottom line. Principle-based buying presents a fresh stream of revenue.

Agencies don’t have to charge clients more for their services directly. Instead, they can simply add that little mark-up and pocket the difference. Hello, new income stream!

Flexibility = opportunity. 

If an agency can score discounts or bulk deals from media outlets, they’ve got a lot of room to play with. This means they can offer clients creative, custom-tailored packages that might not otherwise be available.

Sure, it’s still about making money. But agencies could potentially pass on some of those savings to clients (key word: potentially).

If done right, it can create savings for clients. 

In an ideal world, clients could benefit from lower media costs. If agencies can land a sweet deal with a publisher, they might be able to offer their clients cheaper placements.

But, as with everything in media buying, this isn’t always the case. More on that in a sec.

The concerns:

And of course, there are a few. You didn’t think it would be all sunshine and unicorns, did you?

Lack of transparency.

Here’s where things start to get a little murky: clients might not even realize they’re being charged a higher rate than what the agency paid for the media.

Imagine getting a bill for something and then realising you paid way more than you should have. That’s the risk.

Agencies may not always disclose that mark-up, which could create some trust issues down the line. No one likes being taken for a ride, even if the ride's a smooth one.

Ethics (or lack thereof).

Some critics argue that principle-based buying is just a nice way of saying “price gouging.”

If the mark-up is too high, you’re exploiting the client, especially when the agency’s financial interests are directly tied to how much they can inflate prices.

It’s a slippery slope. And, while it might make the agency more money, it could hurt the long-term relationship with clients. Trust, after all, is everything.

Misaligned incentives.

Agencies are, of course, incentivised to push these higher-priced packages to clients in order to make more money.

But what if that’s not in the client’s best interest? Sure, the agency is profiting. But are they really optimising the media spend for the client?

It’s a classic case of follow the money, and it doesn’t always align with doing what’s best for the client’s media strategy.

Not ideal, especially if clients are expecting top-notch, ROI-driven campaigns.

So, should you jump on the bandwagon?

Before you go running off to adopt this practice, there are some important things to consider. Just because something sounds profitable doesn’t mean it’s right for every brand or client.

Client relationships matter – duh.

Transparency is everything in the media space. If you’re going to implement principle-based buying, you’ve got to be upfront with clients about how it works and why it might benefit them.

Otherwise, you risk losing trust. And no one wants to be the agency that appears to be exploiting clients, even if that’s not the case.

Where do you draw the line?

It’s crucial to set ethical boundaries. If you’re marking up media space, make sure it’s justifiable.

So don’t get greedy. A little mark-up is fine if it benefits both parties. But charging excessive rates will likely come back to bite you.

Your clients aren’t stupid, and neither are their competitors.

While this could be a nice cash grab for now, you’ve got to ask yourself whether this model is sustainable in the long run.

What happens when clients catch on or demand more transparency?

Will this practice remain viable, or will it become a relic of marketing history?

Just something to keep in mind.

As with any evolving practice, there’s a chance this could attract regulatory attention.

Especially if agencies are marked up too aggressively or lack transparency, the powers that be could start looking at it more closely. If you're going down this road, keep an eye on potential legal and regulatory implications.

But why is it buzzing right now?

Because, well, everyone’s looking for an edge.

With the ever-changing media landscape, agencies are getting creative in how they approach buying and selling ad space.

The good ol' days of simply negotiating media buys are behind us. Agencies need fresh, innovative ways to keep the cash flowing.

Principle-based buying is an answer to that—at least for now.

The big question is, Will it last? Or will this be another marketing trend that fizzles out as quickly as it popped up?

-Sophie, Writer