Proprietary/Inventory Media Part 2

Overview

This is the second in a series of articles designed to help advertisers navigate the financial aspects of their agency relationships so they are better equipped to manage them. 

We noted in Proprietary / Inventory Media (Part One) that the pressure on advertisers being applied by their media agencies to participate in the buying of proprietary media was ever increasing.  

Fast forward to summer 2025 and that pressure has only intensified. Indeed, a read through the 2024 financial statements of the large advertising agency holding companies, along with the accompanying results presentations and interviews, will tell you that they intend to generate significant income growth in 2025 (and beyond) from selling inventory / proprietary / non-disclosed media and products to their clients.  

The message to advertisers could not be clearer: media agencies are not hitting their financial targets from the fees you pay them alone; they need other sources of income, such as inventory media and associated proprietary products, to deliver the results expected by their investors. 

 As we demonstrated in the tables in Part One, assuming a 50% margin (which is not unreasonable according to industry experts), if a media agency can move 10% of its clients’ media spend into inventory / proprietary products, it can offer them a 10% discount on the ‘market price’ and still increase its own income by circa 39%. The margin these products contribute to the P&Ls of media agencies is significant and will have a bearing on how they manage your account. 

In this second article on inventory / proprietary / non-disclosed media, we’re going to cover two key areas that advertisers need to be clear on: 

1. 1. Are we going to participate in buying proprietary media? 
   2. If we are, what governance programme is required?  

Are we ‘in’ or ‘out’?

For most brands, a great deal of time is spent agonising over whether they are ‘in’ or ‘out’ of inventory media programmes. The dilemmas raised challenge personal, as well as corporate, values. Having a clear set of corporate values, such as one of our Founder’s former employers, Mars Confectionery, with its ‘Five Principles’, against which you can test whether proprietary media aligns, certainly makes the decision making process easier. 

So what are the key questions that advertisers need to be asking themselves?  

1. 1.   Are we comfortable giving money to a third-party to buy a product on our behalf when they are contractually obliged to demonstrate to us how much they paid for it? 
   2.   Are we comfortable giving money to a third-party to buy a product on our behalf when we have waived our rights contractually to know how much they paid for it (i.e. as is the case with inventory media)? 
   3.   Does our answer to 2. change if we understand that the third-party bought the product at a substantial discount? 
   4.   Does our answer to 3. change if we believe that some of that discount is shared with us? 

The answer to question 1 will be ‘yes’ for every advertiser using a media agency. It is the typical way of working: a brand pays a fee to a media agency for the planning and buying of its media, during which the actual cost of the media bought by the agency is disclosed (and auditable). Straightforward and a comfortable place for both parties. 

The answers to questions 2 – 4 will vary greatly between individuals and advertisers for a variety of different reasons, which we will explore shortly. 

Brands who answer ‘no’ to questions 2 – 4, will not be buying inventory / non-disclosed media from their media agency. It is a perfectly justifiable position to take. All of our clients who take this approach, of which there are many, are crystal clear about their decision and, accordingly, sleep well at night. Just as importantly, they don’t spend any of their waking hours thinking about or managing proprietary media. They can focus all of their time and energy in other areas e.g. monitoring their media agency’s performance against agreed KPIs; implementing recommendations from their financial compliance audit reports; assessing campaign effectiveness etc. 

At this point, it is worth stating, and some may take me to task on this, that only advertisers who do not buy inventory / proprietary media, can aspire to have a ‘transparent’ relationship with their media agency. If ‘media transparency’ is truly important to you / your organisation, inventory / proprietary media cannot appear on your media plans.  

Brands who answer ‘yes’ to one or more of questions 2 – 4, will be buying inventory / non-disclosed media from their media agency. It too is a perfectly justifiable position to take. That said, many of our clients who take this approach, of which there are also many, find themselves continually agonising over whether they’ve made the correct decision. In addition, they spend a lot of their waking hours thinking about and managing proprietary media – it is definitely the more time consuming of the two options. 

Let’s focus our attention now on advertisers who have chosen to “opt-in” to proprietary media. 

The Dilemmas

The most common dilemmas that clients who engage in buying non-disclosed media express to us are: 

1. 1.   Are we really buying the media at a discount to the market price? 
   2.   Does it meet the quality measures promised? 
   3.   How much extra income is the agency making out of us? 
   4.   Is our media buying agency now able to act in our best interests in all instances? 

The Simple Answers

The answers to these questions, at least from Financial Progression’s perspective, are:  

1. 1.   On balance, probably. Independent media performance auditors will be able to give you an informed perspective 
   2.   In some cases, yes and, in some cases, no. Again, independent media performance auditors will have an informed perspective 
   3.   A significant amount. You can model different scenarios yourself using the “numbulator” referenced in Part One – contact us for a copy 
   4.   No. By acting as a media reseller, there is a clear conflict of interest between your best interests and the agency’s. Do not underestimate this. 

A Non-disclosed Media Governance Programme

On the basis that a media agency selling you non-disclosed media (i.e. media for which contractually you are waving your rights to understand the actual cost to the agency of the media purchased) has a conflict of interest and is not able to act in your “best interests” at all times, we recommend the advertisers put in place a Non-Disclosed Media Governance Programme to manage the associated risks. 

So what might that look like? 

1.  Have a media agency contract that sets out:

• • what inventory / proprietary / non-disclosed media is 
  • how it is to operate (with as many examples as possible – tedious in the short term, but essential in the long term) 
  • a “best interests” clause. If an audit finds that the agency has not been acting in your best interests, this will provide you with a degree of protection 

        2. Define: 

• • how much you will allow to be bought as a percentage of your total media spend (i.e. 5%, 10%, or more) 
  • how it will be presented on a media plan issued to you for approval (e.g. a clear identifier that any relevant line is “inventory media”, the name of the agency group company selling it, a description of the media, the price quoted, a breakdown at the bottom that shows the percentage of the total plan comprised of inventory media, etc.)? 
  • the approval process in your organisation – who, what, how and when? 
  • reporting requirements (e.g. quarterly reports of the percentage that inventory media comprises of total media spend bought, a list of people who actually approved the plans etc.) 
  • how you will measure its performance – you are being told that it will perform just as well as normal media, despite the discounted price, so it is imperative to check.  
  • the consequences the agency will face for not complying with its obligations under the contract. Consider whether new contractual remedies are required specifically for inventory media. For example, if the agency goes ahead and buys inventory media without having presented it for approval as required by the contract, should the agency refund the difference between what it has charged you and the price it paid (i.e. effectively making it a standard media buy)?  

      3. Appoint: 

• • a contract / financial compliance auditor, such as Financial Progression, to assess regularly (i.e. annually) whether the agency is complying with its obligations under the agreement in relation to inventory media 
  • an independent assessor of the price, quality, effectiveness and value of any non-disclosed media to guard against the agency marking its own homework e.g. a media performance auditor 

      4. Review regularly: 

• • the periodic reporting of inventory media bought by your agency 
  • your financial / contract compliance audit reports 
  • your media performance audit reports 
  • Discuss regularly (e.g. quarterly) with your media agency the results arising from the reports outlined in 4. above  
  • Take action, collectively, to resolve any issues promptly i.e. by the next quarterly meeting  

 5. Discuss regularly (e.g. quarterly) with your media agency the results arising from the reports outlined in 4. above  

6.  Take action, collectively, to resolve any issues promptly i.e. by the next quarterly meeting  

In Summary

• Media agencies are not making enough money from the fees they charge clients alone and they have identified inventory media as a key source of revenue 
• As an advertiser, be clear as to the reasons you either are, or are not, buying non-disclosed media from your agency 
• If you choose not to buy it, your agency relationship has the potential to be truly ‘transparent’ 
• If you choose to buy it, recognise that the agency now cannot act in your “best interests” at all times – there is a clear conflict of interest  
• As a result, put in place a Non-Disclosed Media Governance Programme to manage the associated risks 

If you’d like to chat about how to manage inventory / proprietary / non-disclosed media differently in your organisation, or would like our “numbulator” so you can perform your own scenario planning and analysis, please email us to set up a meeting.