Media Management

Where Are The Principles in Principal-Based Buying Today?

Profit vs Risk

Some HoldCos want it both ways with their version of PBB—more profit but no more risk. My MBA taught me that this scenario is not possible in any real marketplace

Principal-based buying, or PBB, is under fire in our industry—and for good reason.

What many HoldCos call principal-based buying (PBB) has become one of the most discussed—and misrepresented—concepts in media today.

Some of these players have misappropriated a term that, for me, has defined a truly unique, effective, and valuable business tool I’ve championed for over 30 years.

For them, PBB is a tool that, at best, boosts margins while avoiding any risk, and at worst, still boosts margins and misleads their clients about the actual value they are receiving.

It’s wrong, and I’m calling it out. This goes way beyond the “principal” at the core of PBB. It’s about the “principle” that has been the foundation of my business.

I would like to explain as both a former marketer who benefited from corporate trade and the founder of an independent firm providing clients with the original definition of principal-based buying services.

The primary principle at the core of PBB is being a “principal” in a financial transaction or business model. Principal means being the boss, being the school principal, being the client, or more specifically, using your own money to take “ownership” and financial risk. Real ownership is risky, but for that increased risk, you can get an increased reward (Finance 101, Risk/Reward). You can also suffer losses, if you are unable to re-sell what you now own.

Why is this important?

Because some of the large holding companies are selling a false narrative to their clients about PBB. They offer PBB services, but they aren’t actually acting as principals. Using your client’s money to make volume commitments with zero penalty for shortfalls is not a principal-based risk model. It is the exact same model agencies have always used. This sounds to me more like Principal-Based INVOICING, not buying.

So, let me explain in another way. The HoldCos are hired as agents/brokers to represent client money in the market and to get the best price in a no-risk, fully disclosed approach—the same as a stockbroker or insurance broker.

When they use the same broker model but under the bamboo-screen name of non-disclosed PBB, they boost profits for the same service and risk profile as before they called it “PBB.” In this arrangement, very little differs from the standard client-agency agreement around media buying. Yet the process is being inaccurately and deceptively called, and invoiced, as PBB.

Don’t be fooled. These AOR/HoldCo models aren’t built around client outcomes—they’re built around growing and hitting agencies’ internal margin targets. The result is a murky ecosystem where incentives are misaligned, and transparency often takes a back seat.

It’s an offense to the brands who entrust their agencies to focus on the best outcomes for their clients. It’s also infuriating for someone like me who has spent the better part of his career leveraging real principal-based buying to unlock auditable value and solve client problems.

It’s really a matter of principles. If you don’t care about these subtleties, so be it. If you do care and don’t like the deception, there are other options. For 35 years, there has been a group of independent companies not owned by HoldCos and not acting as AORs, engaging in genuine principal-based buying. They make real investments in media futures, using their own money, taking on real risks, and creating real rewards for their clients.

Some HoldCos want it both ways with their version of PBB—more profit but no more risk. My MBA taught me that this scenario is not possible in any real marketplace. 

About the author

Gordon Zellner is the Founder and CEO of Evergreen Trading, a provider of solutions and counsel for media budget challenges, supply chain logjams, and other business pain points.

The views and opinions expressed are solely those of the contributor and do not necessarily reflect the official position of Marketing Procurement iQ or imply endorsement from the publisher