No sooner is an unknown or nondisclosed revenue stream captured, another rears its head.
However, unlike many hidden income streams, this one is hiding in plain sight. In 2024 the highest profile entrant into the media “Whac-a-Mole” contest must be “Inventory” or “Principal” media.
While Inventory media has been around for years, it has morphed from “barter” into a simpler form that is clouding the role of Media Agencies.
As per The Media Leader, inventory media “… refers to the acquisition of media inventory by a media agency (or media agency group). For the purpose, an agency uses its own funds and acts as a principal in the deal. Inventory media is acquired directly from the vendor without having an order placed by a client. Because of the deal specifics, the agency will thus become the owner of the new media. As the agency is an owner, disclosure of real prices, other concessions and discounts becomes unnecessary. The agency also reserves the right to refuse audits.”
It’s very easy to see how these specifics can contribute to a significant lack of transparency.
There is something uncomfortable with an arrangement whereby a Media Agency, appointed to negotiate and buy media at the best possible price, is also buying its own inventory at a price not generally available to the Advertiser on whose behalf the Agency is buying.
It suggests to me that the prices negotiated by Agencies who indulge in inventory media selling, are being inflated by the Agencies’ purchases. When inventory is pre-sold, the remaining airtime is more valuable, i.e. when an agency is pre-buying inventory to resell to an advertiser, they are inflating the market.
I can hear buyers’ retort “… not relevant, as this is low-demand airtime!” Then if this is the case, why sell it back to the client at an increased price to what the Agency paid?
Agencies engage in this practice for one reason only, there is a greater margin than they could possibly achieve in a transparent market.
It is not that long ago that in a soft market, Agencies negotiated “guaranteed bonus” components. This had the effect of holding up rates in a soft market, yet advertisers yielded additional value from their budget in line with market demand via bonus airtime.
Now this excess inventory has ended up on the Agency side of the ledger and is now sold back to the client at a discounted price.
How much is the Agency paying? We don’t know, but you can bet it is a hell of a lot less than the client is paying the Agency.
We are often told that the common “saving” to the client is around 10%. But that’s what the Agency passes through. How much is the Agency yielding?
Perhaps the best quote comes from an ANA report earlier this year, in which one respondent within the survey (on the growth of Inventory Media) said: “I don’t know if my agency is recommending principal media because it’s the best media for me, or the best media for them.”
I think the answer is simple … it’s the best deal for the media agency.
The best deal for the client was when unsold media was passed through at its real value as bonus.
In addition to the above, one does need to question whether the ownership of media inventory is counter intuitive to agnostic media planning and buying. Isn’t it probable that Agencies would push clients into media space where they have their own stock?
Enth Degree’s opinion is that this practice is fostering a market where the buyer is also the seller, a position we find incongruous and susceptible to buying decisions based on the Agencies’ benefit not their clients’.
