What you need to know:

• IPG chief Mark Coad told last week's Future of TV Advertising conference that principal media trading has been overblown, that it barely exists in Australia and his group has no local principal media arrangements in place locally bar global agreements. He suggested independents are the more likely candidates for pushing arbitrage models.
• GroupM CEO Aimee Buchanan didn’t say whether the group operates principal trading models locally, but suggested it was far less prevalent than in other global markets.
• Regardless, she said the real issue was whether clients trust their agencies to do the right thing.
• Match & Wood chief Christopher O’Keefe said independents are “100 per cent” doing principal media trading, but he countered Buchanan’s point – trust or otherwise, inflated prices on media due to mark-ups skew media mix models, which in turn impacts marketing effectiveness data, which in turn impacts channel investment decisions. In other words, principal media deals and capital programs distort the market and therefore results for advertisers. 
• In a separate panel, ING CMO Danielle Hamilton admitted she had little idea about whether or not principal media trading is taking place, but backed Coad’s view that “it’s not real”, and said the financial services firm values its relationship with IPG-owned UM more than ever and wanted its best people on the account.
• Nine’s Helena O’Dowd said that either way, the onus sat with marketers to rigorously interrogate agency recommendations, suggesting their may be “some complacency” in the market.
• Coad, Buchanan and O'Keefe also gave attendees a look into the immediate fallout of Trump's Tariff war – while some with exposed supply chains and footprints will likely pull back marketing investments, so far most are holding – and some, like auto and entertainment – are ramping up.
• The media agency chiefs philosophically backed the need to sustain local journalism and local media – but with the caveat that media owners must prove effectiveness to win spend versus global platforms.

Overblown?

IPG Mediabrands boss Mark Coad last week stated categorically that the holdco is not doing any local principal media deals – and took issue with the way the trade press has framed the practice of buying media and onselling it to advertiser clients for a mark-up.

Principal media divides opinion. Some suggest marketers “sometimes prefer” the model because it allows them to access non-working media services that procurement departments have effectively vetoed and thereby secure a better overall service while allowing the agency the leeway to make enough money to pay for those ‘free’ services while making a profit. Others believe it undermines objectivity and the role of an agent as it risks skewing media investment to where best margin can be made for the intermediary.

Either way, Coad suggested principal media barely takes place in Australia, or at least on local accounts. He said his group had no local deals in place beyond global arrangements and that independent agencies are “probably” more active in those arbitrage models that he said didn't really exist. 

GroupM CEO Aimee Buchanan didn’t say whether her group locally uses principal trading models – she wasn't directly asked – but said the question for clients is whether they trust their agency. Trust or otherwise, Match & Wood CEO Chris O’Keefe said the problem with large mark-ups on media is that it distorts market mix models and therefore clouds what constitutes effectiveness while skewing investment decisions.

Where the trio did align was that effectiveness, or otherwise, is what will determine whether local media can stem the flow of dollars to global platforms, and a two-speed economy is emerging across the piste amid clients ramping spend or holding tight amid tariff turmoil and wider market tightness. But to those "capital programs" first.

When asked on stage by Adwanted's Future of TV Advertising organiser, Justin Lebbon, about principal media trading, Coad rebuffed the assertions: “There's an assumption that it exists at scale," Coad said. "It doesn't exist at scale at all. In fact, I can tell you that … working for a global company, do I have an awareness of some global arrangements? Of course I do. Do I have a local principal media arrangement in this country? No, I do not.”

Globally IPG’s Orion Worldwide business unit is active within principal media trading. It uses "IPG Treasury cash investments with media partners to create leverage that delivers client savings on select media". Locally, Orion recently appointed a head of principal trading, based out of Brisbane, and is currently hiring more Sydney trading staff.

Bad press

Coad said that if principal media did exist locally, it would be “no different to some of the capital programs arranged now, only the money’s upfront instead of at the back.”

He also suggested that principal media is “probably” more prevalent within independent agencies, to which Chris O’Keefe, CEO at Match & Wood, stated it is “100 per cent happening” within independent agencies, albeit not at his business.

Asked if principal media is “as bad as the trade press make out”, GroupM CEO Aimee Buchanan, suggested otherwise: “In Australia, no,” she said.

“I think the problem with the whole conversation is you're speaking in generalisations. But if I was to generalise, I think Australian clients still put trust and transparency as paramount, and I think the wrong question is being asked,” per Buchanan.

She said “the right question is, are you confident in your agency” and its people.

Match & Wood’s O’Keefe countered that the problem with large mark-ups on inventory is that inflated pricing can skew market mix models, which in turn skews effectiveness data, which in turn distorts channel investment – in effect risking a spiral whereby incentives potentially outweigh objectivity and outcomes.

“I think with clients these days, what they want to know is that, yes, they can trust your people, but they can trust your data, they can trust your decision-making. And I think it makes it really difficult if you're trusted to value media, but you're also pricing it. That's a really difficult thing to navigate.”

What wasn’t asked on the panel session is the scale of media owner involvement in principal deals, which observers have told Mi3 has significantly ramped up over the last 12 months to encompass the majority of the market – either willingly, to secure revenue amid a flood of inventory and downward pressure, or through fear of being left off the plan, or both. Or whether media owners and shareholders are likely to countenance genuinely high grade inventory to be sold at a major discount, thereby eroding margin.

Either way, IPG’s Coad said press coverage categorising principal media as one way traffic and “demonising” the arbitrage models being ramped up by holdcos globally was both inaccurate and unfair on those locally working to serve clients.

“I just get frustrated reading about it, because I know the truth and I know what's happening,” per Coad.

“There's 5,000 people within agencies in this country and they do it because they're proud, they enjoy their job, and they do it because they love doing it. They don't like reading about the ‘fact’ that they're all crooks and thieves – they know that they are genuinely not, and I don’t like it on their behalf.”

Awareness issue

Coad has a point on frontline agency teams. Australian expat and former Global Chief Media Officer at IPG Mediabrands’ media agency UM, Joshua Lowcock, told Mi3 last month in a warts and all podcast and feature that client-facing teams are “probably not aware of it”.

“In reality, it's creative accounting structures and offshore operations to hide where the principal-based trading goes," said Lowcock, now VP of Media at Quad in New York. "So if clients are – air quotes –‘sophisticated’ enough to conduct an audit, they won't discover the reality of what's happening. A rank and file person at an agency can stand up and say ‘No, we're not making hidden margin’, because they're probably not aware of it, and they're probably not doing it in their business unit.

“But somewhere in the myriad of complexity of a holding company, I can tell you it's occurring – and a big, large armoured vehicle with boatloads of cash is pulling up somewhere and unloading it into a holding company,” says Lowcock.

In truth, he says, “It’s probably more electronically transferred.”

Lowcock and his fellow panelists, Dave Gaines, a former GroupM US exec and founder of Media by Mother New York [the media agency of UK creative hot shop Mother] and Nick Manning, chair of UK-based Media Marketing Compliance, all said principal trading and capital programmes were entrenched practice – but there were viable compliance and strategic alternatives to manage the inherit conflicts arising from media agencies both buying on behalf of and selling media to advertiser clients.

Lowcock and Manning outlined the compliance frameworks and checklists that advertisers needed to apply for transparency and effectiveness audits – in other words, how to ensure the media an advertiser is buying through agency-led principal trading and capital programmes doesn't better suit agency profitability versus an optimal campaign media schedule to hit commercial targets.

Gaines went further, arguing that holding company media agency groups had moved from "professional services to platform services", aping Google and Meta, and that media strategists, analysts and planners should be carved out of media agencies that trade principal media.

"I don't think it's a GroupM solution, necessarily," he told Mi3. "It’s a WPP solution but if I were still there, I would strip all of the strategists, the planners, the analysts, out, and I would make the media plan the output of the creative agency. I would leave the GroupM machine to do what it's doing, which is trying to replicate those platform exchanges."

In Gaines' worldview, creative agencies housing strategy and media planning is the only way "you're ever going to have objective planning and be accountable to outcomes for clients if your buying, your activation model, is going to be based on slightly opaque algorithms and use of data.”

Marketer realities

At the Future of TV Advertising forum last week, principal media resurfaced in a later session with ING CMO Danielle Hamilton and Nine Entertainment director of growth & retention, Helena O’Dowd – and it was no more clear-cut.

Hamilton admitted she had “no idea” about the prevalence of principal based trading models, and said that media makes up about 10 per cent of her remit. She deferred to IPG’s Coad: “Like Coady says, it’s not real”.

Either way, she said agencies are “more valuable than ever” to ING, “and I say that even through the lens of us in-housing performance marketing channels”.

“In a 13-year relationship, it is one based on genuine trust and collaboration. There's so much IP in that business on our business. And we as a client try to motivate our agency partners to want to have their best talent work on our business.”

Nine’s O’Dowd has perhaps more granular insight through working for company acting as both a buyer and seller of media, and said she leverages her agency partners to get a better understanding of how rivals are going to market.

On principal media, she suggested there may be a degree of satisfaction in the market with such arrangements, or perhaps a lack of knowledge.

“It’s down to are you asking the agency the right questions? Are you scrutinising the recommendations? I think potentially there's a level of complacency in how budgets are being transacted versus others that are really into it and [asking] ‘explain all this to me and tell me how it's all been distributed’.”

Local spend holds – for now

Beyond principal media, the session covered the impact of US tariff turbulence on marketing investment.

O’Keefe has not yet seen any major pullback from his largely Australian-based clients, but continued economic uncertainty has seen growth largely flat-line.

Buchanan said the last few months has seen a two-speed economy emerge – and while some clients are battening down the hatches, others are ramping up.

“Think about the auto category – Chinese auto brands are spending big. Entertainment – new streaming services are launching. We’re in an election year – Parliament, government are spending big.”

Coad likewise said impacts will be lumpy across categories, depending on supply chain exposure and footprint, but said most will now be carefully weighing investment decisions:

“I don't expect you can have an economic event like that without some form of assessment.”

US political and economic instability compounds a tough 18 months in which marketers, agencies and media have all been asked to do more for less. But O’Keefe reckons that provides an opportunity for sharper econometric models and MMMs to make their mark in proving marketing effectiveness, defending budgets and showing which channels are delivering best growth.

Local vs. global media

Effectiveness will determine whether local media owners see any reversal of the flow of dollars to global platforms, per the panel.

Asked whether agencies should be playing a role in supporting local media amid increasing global incursion, and influencing their clients to help fund local content. IPG Mediabrands’ Coad said he was “philosophically” on board – at least with local news media.

“I believe that we need a healthy news industry in this country … I think we need our local agendas supported by local newsrooms. We need our local politicians held to account by local media. We don't need our local agendas being driven by global players,” he said, with impacts acute outside of the metro areas.

“When the newsroom leaves the town, a lot of local issues don't get discussed anymore.”

But he caveated that it’s on media owners to ensure they can drive effectiveness, because “where our clients’ money ends up is going to be in the places where it's most effective”.

O’Keefe agreed: “We're paid to put their media in effective places. So, if there's opportunities out there where you can come and help us explain where local journalism and effectiveness meet, probably that's the conversation that we need to have more.” Though he admitted his agency hasn’t been doing a “great job” of pushing that agenda.

Buchanan said GroupM hasn’t been “perfect” in supporting the local ecosystem either, but struck the same line: “A big part of it comes down to what's driving results, and a lot of that often happens in platforms”.

However, she said that GroupM is locally pushing clients to support local brand-funded content production through its own global Motion Content unit – which GroupM can then distribute internationally.

So far, she said there’s a “real appetite” from clients to pay for bespoke content to be produced – and that this year GroupM will fund some shows itself.