Principal media in the age of attention metrics
Opinion
When done properly, with better metrics and a focus on real outcomes, principal-based trading can align agency and advertiser interests and deliver superior results.
Media buying is undergoing a transformation as advertisers modernise their relationships with agencies.
One approach capturing renewed interest is principal-based media trading — an arrangement where an agency purchases ad inventory on its own account and then resells it to the advertiser with a margin.
Principal trading draws fire for two flaws: bad metrics and pseudo-principal deals.
The second critique is more of a misunderstanding. In some cases, what’s labelled as principal-based trading doesn’t quite live up to the name; the agency may not actually take a position in the media, but still operates within a non-disclosed structure that creates confusion.
But to write off principal trading entirely because the label’s been misused is like blaming the scalpel for a bad surgeon. Just because a few “principal” deals weren’t truly principal doesn’t mean the model is flawed — only that its execution sometimes is.
Regarding “bad metrics”, new measurement products powered by attention data offer a solution. Attention metrics provide a clearer view of placement quality, giving buyers the confidence to evaluate media on its actual value — even when the pricing model isn’t fully transparent.
The reality is that outside centrally planned economies, most markets run on non-disclosed margins. When done properly, with better metrics and a focus on real outcomes, principal-based trading can align agency and advertiser interests and deliver superior results.
Incentives and the cost-plus challenge
Before we go further, let’s hear about cost-plus models from the brains behind Berkshire Hathaway, the most enduring investment vehicle since the Dutch East India Company:
“If you want to talk about the power of incentives and the power of rationalised, terrible behaviour, after the defence department had had enough experience with cost-plus percentage of cost contracts, the reaction of our republic was to make it […] a felony.”
— Charlie Munger
Among economists, cost-plus ranks just below communism and barely above burning money for warmth on the leaderboard of incentive disorders.
The well-documented friction that ensues is called the principal-agent dilemma. As Michael Jensen and Wiliam Meckling wrote in their 1976 paper, the costs from principal-agent “increase when outcomes are hard to observe or attribute to agent effort”.
Sound like a market you might know?
Principal-based trading flips this equation. In cost-plus models, suppliers grow revenue by increasing client spend or slashing their own costs — neither of which necessarily improves outcomes. In a principal model, they’re incentivised to invest in better people, data and technology to deliver a higher-value product.
As Interpublic CEO Philippe Krakowsky noted recently, a growing number of advertisers “accept and even embrace principal buying” as part of their media strategy. Not because they love opacity; it’s because, done right, principal buying aligns incentives and rewards performance.
The key, of course, is structuring those incentives well. While it’s tempting to tie agency compensation directly to business outcomes, attribution remains a mess and long-term goals often clash with short-term measurement windows. Anyone held accountable for outcomes eventually learns it’s cheaper to predict them than to cause them.
Since an agency’s core responsibility in a principal deal is media buying, the most sensible guarantee is around the price and quality of that media.
Principal-based attention
Attention metrics have rapidly evolved over the past five years to outcome-linked metrics that score placement quality.
This latest generation of metrics allows advertisers and agencies to define the quality of media placements in advance — agreeing on a minimum quality benchmark that all placements used to deliver impressions must meet. This creates an opportunity to denominate contracts with an accurate representation of the media being traded.
By the end of this year, over half of the major holding companies will have non-disclosed guaranteed attention products in market. These models are gaining traction because they solve a long-standing problem with traditional agency compensation; whether through hourly billing or cost-plus commissions, legacy models separate payment from performance. Agencies get paid to plan and place media, not necessarily to find value.
This demonstrates why the incentives created by principal deals are so powerful: they reward agencies for delivering higher-quality media, not just cheaper media.
By earning margin on the value they create, agencies are motivated to negotiate bulk deals and optimise centrally, using their scale and expertise to develop proprietary media products backed by attention metrics that validate quality and impact.
For agencies, it’s a chance to move from being a vendor to a value creator.
A constructive path forward
Principal-based buying, long treated with suspicion, has the potential to become a force for transparency, fairness and performance. But only if it’s underpinned by the right metrics.
Thoughtfully designed attention metrics create the common language that media buyers and sellers need. They allow media investment to be evaluated not by what it costs but by what it is.
In this model, margins aren’t the enemy — they’re the reward for delivering real value. Agencies profit from smarter buying and optimisation. Advertisers get effective, outcome-driving campaigns. Publishers that deliver a higher-quality product are compensated for it.
Trust improves and the entire marketplace moves forward.
To borrow from Munger again: bad incentives don’t just produce bad behaviour; they rationalise it. The solution isn’t to eliminate margins or obscure models, but to anchor them to something that reflects real value.
Principal-based trading guided by credible metrics offers a way to align profit with value and build a media marketplace that rewards quality.
Marc Guldimann is founder and CEO of Adelaide