As proprietary media solutions become more commonplace, advertisers are scrutinising its impact on transparency, effectiveness and client–agency relationships.

Proprietary media – also known as principal-based, inventory-based or outcome-based media – involves media agencies purchasing media inventory, often in bulk, and reselling it to clients at a margin.

It can be bundled with other services, such as tech and data, and solutions may result in advertisers unknowingly agreeing to reduced audit rights and transparency.

The model has become increasingly contentious. Holding companies can generate higher margins at a time when agency profits are facing downward pressure, while brands question whether they receive sufficient transparency in return.

‘It’s made out to be a cardinal sin’: Marketers’ view on principal-based media trading

A senior media executive at an insurance firm, speaking anonymously to Marketing Week, says the practice can deteriorate trust between clients and agencies.

They first encountered the practice after taking responsibility for agency relationships in their role. A solution from a large holding group appeared on the media plan as a single line item, prompting them to question what it involved and how it worked.

“It was one of those situations where the agency said a client had never stopped doing this. And you think, ‘Okay, well I’m not going to be the first,’” they say. “If all the other big clients are doing it, then of course we’d be keen to do it.”

“But more and more, it became an area where it failed the sniff test.”

They explain that if their CFO or CEO asked them to explain how the proprietary media deal worked, they were unable to do so. Eventually, they decided to stop it entirely because they were uncomfortable not understanding how it was being accounted for.

“You scratch a little bit more, and it’s unauditable. You scratch a little bit more and you don’t really find out the spot times [on TV] or when it’s happening. It’s just not transparent. It becomes this mess that you just go, ‘Actually I want to get a handle on this’.”

Transparency is improving

One procurement specialist at a leisure brand, also speaking anonymously, told Marketing Week the practice involves “a lot of skulduggery”, although they believe transparency is improving.

As awareness grows, they advise brands to take a “buyer beware” approach, while acknowledging that proprietary media can deliver benefits when its risks are well understood.

The source says their organisation decided to apply caps on proprietary media spend in each market to try and reduce the level of spend after discovering some of its markets were “heavily reliant” on proprietary solutions.

However, econometric and media modelling showed that in one market, proprietary media was performing well, prompting the brand to exceed its original cap.

“We’re not too bothered that it’s gone above the cap, but we just wanted to put those controls in place to ensure that if it wasn’t performing, we could make sure we weren’t spending too much money because we knew that we couldn’t audit it,” they say.

Just because the current CMO agrees to [proprietary media], another CMO can come in and be completely outraged by this – that’s why it’s such murky waters.

Anonymous

Agencies often buy proprietary media as a proportion of a total campaign. For example, a portion of a linear TV campaign may be funded through proprietary media, with the remainder bought through standard media.

In many cases, media owners, and sometimes even day-to-day agency buyers, do not know how much is funded by the two different types of media and therefore the campaign ends up being traded as one whole campaign, irrespective of funding.

As a result, post-campaign reporting makes it difficult to separate delivery driven by proprietary media from that delivered via standard media.

Meanwhile, it’s becoming more common for proprietary media to be sold as part of a proprietary solution, where the media is combined with proprietary technology, data and other services.

“Proprietary media is not just all these different channels, it’s increasingly and predominantly now proprietary tech solutions,” explains ISBA’s director of agency services Nick Louisson.

“Media is bundled with technology, bundled with data, and sometimes with other services – it’s now a full service, rather than just repackaging of media.”

This makes it even more challenging to measure the effectiveness of proprietary media and understand the amount advertisers are paying.

“With these bundled solutions, [agencies] are not giving you that level of detail where you can understand whether you are paying a competitive amount for the technology piece, or an inflated amount for the technology piece,” Louisson adds.

Marketers unknowingly kill great ideas through risk aversion, here’s how to stop it

Despite the lack of transparency, proprietary media can deliver benefits when structured and governed effectively, says Louisson.

Guidance published today (18 February) by ISBA states that proprietary arrangements can offer improved value, including discounts, guaranteed outcomes such as cost per lead, rebates or cashback, access to exclusive placements, greater agility and enhanced capabilities through technology and data.

Meanwhile, the IPA’s director of legal and public affairs Richard Lindsay says proprietary media is a “complex area” of the market and each media agency operates its provision of proprietary media differently.

“It is important to note that proprietary media can deliver value right across the entire supply chain, whereby media owners secure payment upfront and guaranteed income, advertisers benefit from improved pricing and certainty, and agencies, although assuming the commercial risk, benefit too,” Lindsay explains.

“In the current economic climate, proprietary media can be an important part of the media mix for all.”

ISBA launches guidance on how brands can approach proprietary media

Deteriorating trust

However, when not handled correctly, the practice can damage an otherwise healthy client-agency relationship.

Looking back, the executive at the insurance firm admits the issue had a significant impact on the relationship with their previous agency.

“You want to talk about your agency as being that strategic partner,” they say. “It just got to that point where I didn’t feel I could bring the agency in, because they’re purely focused on their commercials, and not about doing the best deal for us, which ultimately impacts trust and the relationship.”

The issue has even extended into pitches. The same media executive says they explicitly asked for proprietary media not to be included in an RFP, yet a media agency still pushed it with the procurement team.

“As soon as an agency has media inventory that they need to sell, it’s a vested interest, and suddenly gets pushed,” they say.

In the current economic climate, proprietary media can be an important part of the media mix for all.

Richard Lindsay, IPA

Despite its potential to deliver value, some clients say inconsistent terminology and definitions create confusion about how proprietary media appears within plans and contracts.

An anonymous advertiser describes the practice as “murky” and “dodgy”, warning it can create one of the biggest trust issues in advertising if not disclosed properly.

“There is a way that agencies are sneaking it into contracts that I don’t think is as transparent,” they say. “What they’re doing is they’re taking advantage of clients who don’t have the equivalent expertise.”

They point to an example from when they first joined the business: uncovering a significant value of proprietary media, despite no one internally being able to clearly explain what it was or how it worked.

“People internally felt that we were being taken advantage of,” they say.

However, they stress this was a single experience and that other agencies can be more transparent in their approach to proprietary media.

“The main thing on proprietary media the agency should do is make 100% sure that the most senior person is fully aware that this is happening,” they say.

“The turnover of CMOs has been unprecedented in the last couple of years. Just because the current CMO agrees to this and is happy to do this, another CMO can come in, or another head of media can come in and be completely outraged by this – that’s why it’s such murky waters.”

‘Cautious but creative’: B2B marketers on how AI is impacting agency relationships

They add that the practice ultimately feels like “dealing with a broker” rather than hiring an agency for creative, impartial advice.

“Brokers are very useful, but that has a very different relationship from: ‘Here is £100m pounds of my spend. Give me advice as to where you spend it’. The advice you give me has a huge impact on my business.”

Despite industry debate, they believe many clients are reluctant to speak publicly about their concerns.

“If you’re a large client and you find out that your agency has been putting hundreds of billions of proprietary media unbeknownst to you, there’s no way you’re going to make a song and dance about that, because you know that your job could be on the line,” they explain.

“It’s like someone’s been robbed, but they’re too embarrassed to tell everyone that this happened to them.”

Louisson says that ultimately “knowledge is power”.

“I want to see advertisers getting that greater transparency, but not just for the sake of having it, so they can use that transparency to test the effectiveness and drive better outcomes.”