Principal-based trading thrives amid CCI raids, brands raise concerns

New Delhi: Amid the turmoil of CCI raids on media agencies and industry bodies over alleged anti-competitive practices, principal-based trading is quietly thriving, undermining brand-agency trust.

Becoming more cautious post-raids, brands are now questioning the true cost of media versus agency markups.

Principal-based trading involves agencies purchasing media inventory upfront and reselling it to clients at a markup. This practice is especially common within large media agency networks and platforms. 

“Clients know where their ads are placed but not the agency’s actual costs, allowing room for hidden trades—such as selling media that agencies obtained for free,” explained a senior executive at a leading brand.

According to global news reports, big tech platforms like Meta and Amazon have also entered principal-based trading agreements with agencies. Amazon’s last media agency review reportedly required winners, Omnicom and WPP, to push retail media. 

Meanwhile, Meta is introducing a bulk-buy model, where agencies purchase Meta inventory upfront and resell it to clients at a markup, as per a Digiday report. These deals further shift the power dynamic, securing guaranteed ad spends for platforms while locking agencies into their ecosystems.

An advertising veteran explained, “These agreements incentivise agencies to prioritise media they’ve already purchased rather than selecting placements based on a brand’s objectives. This reduces transparency as brands may unknowingly pay inflated markups.”

Such partnerships also disadvantage smaller publishers, as agencies allocate bulk budgets to major platforms, reducing market diversity. "Meta and Amazon secure locked-in revenue, but this inflates media costs for brands outside these deals, while smaller players struggle to compete," the industry veteran added.

Regulators, including the CCI in India, are already scrutinising anti-competitive practices in media trading. “If principal-based trading becomes too dominant, watchdogs may intervene, forcing platforms and agencies to reconsider these agreements,” warned the industry veteran.

A senior brand-side executive, who has also worked with India’s top three media agencies, told BestMediaInfo.com, “In principal-based trading, when brands buy ad inventory through an agency’s in-house programmatic arm, markups can reach 50%. Many brands unknowingly pay these inflated rates. We identified this issue years ago and shifted to direct buying via Google’s programmatic platform.”

Another Head of Marketing highlighted the growing agency-platform alignment: “Agencies take a 1% commission from brands but earn 5-10% from platforms. They’re trading with my money, yet I have no transparency on actual costs. How is that fair?”

When asked why the ISA (Indian Society of Advertisers) hasn’t stepped in to regulate such practices, he simply responded, “That’s a question for ISA.”

Why do brands still fall for this?

A senior marketing professional explained, “Many brands think they’re getting a bargain without realising the hidden markups. Take YouTube ads—if YouTube charges Rs 100, an agency might offer it at Rs 80 through principal-based trading. However, the brand doesn’t see that the agency originally bought it for Rs 50. Since brands still perceive a discount, they don’t ask questions.”

Many agencies have adopted hybrid models, offering both principal and transparent media-buying options to maintain client trust while maximising revenue. This setup ensures platforms secure guaranteed ad spends from agencies, securing a fixed spot in media plans.

A publisher told BestMediaInfo.com, “I don’t think publishers lose in this model. Without agencies as intermediaries, selling bulk inventory at scale would be difficult. Publishers lack that reach, which is why platforms rely on ad exchanges to connect buyers and sellers.”

He added that bulk deals primarily occur with agencies, not directly with brands. “We won’t lower rates below what we offer agencies just to establish direct brand relationships,” he explained.

The core issue: Transparency and trust

With principal-based buying, agencies don’t profit by developing the best media plans for a client and securing optimal rates. Instead, they profit by selling inventory they already own. A marketer from a leading brand reinforced this concern, stating, “Agencies benefit not from optimising media plans but from selling pre-purchased inventory.”

A Chief Marketing Officer called the model "unfair," explaining, “Publishers receive less than the true value of their inventory, advertisers pay inflated prices, and agencies profit without adding real value.” 

He warned that principal-based buying distorts market dynamics, leading to higher ad costs for brands outside the model. “If a significant portion of inventory is removed from the open market while demand remains constant, competition increases and prices go up,” he added.

Another marketer told BestMediaInfo.com that many major brands have custom deals with agencies. However, trust issues arise when agencies fail to disclose that media is purchased through in-house arms that buy inventory in bulk. “This lack of transparency mainly impacts smaller advertisers. Many agency deals cover multiple channels and aren’t client-specific. The real concern is clarity—brands should know if they’re benefiting from a direct deal or just part of a broader agency arrangement. That’s where trust erodes,” he explained.

While many brands acknowledge the drawbacks of this model, a former media agency head defended it, arguing that shrinking agency margins have forced this shift. “Clients constantly demand rollbacks and higher ROAS for lower fees, leaving agencies with little choice,” he explained. “This pressure led to consolidation and the rise of principal-based buying—a model many clients accept because it keeps fees low while still delivering measurable ROAS. Agencies can’t work for free. Clients must invest fairly for a balanced system.”

A brand head told BestMediaInfo.com that they are not concerned about agency margins as long as she gets value in terms of quality and pricing. “If I receive competitive pricing and quality, I don’t mind what margin the agency is making,” the brand head said.

The client’s role in the system

Many brands actively participate in these arrangements. A brand head admitted, “Brands demand better deals or fee waivers in exchange for principal buying. If brands valued and paid for real agency services, this model might not exist.”

“It’s unfair to ask agencies how much markup they add on bulk-bought inventory. We can ask if it’s part of a bulk deal, but demanding their margin is like asking a kirana store owner how much they profit on a product—it’s not right,” the brand head added.

A senior marketer summed it up: “It all comes down to intent and transparency. If everything is clear and the goal is to secure the best outcome for the brand, rather than just pushing pre-purchased inventory, the model can work fairly.”

Managing the risks

To mitigate risks, brands must take a structured approach. A media head at an auto brand advised, “Brands must actively engage in strategy execution, especially when agencies shift from advisors to vendors. Regular reviews should track media allocation, ROI, and potential biases. Media performance should align with business metrics for better accountability. Managing these risks carefully helps brands balance efficiency and transparency.”

Ultimately, it comes down to trust. “You may never get all the answers you seek,” a former media agency head remarked. “If you accept that, you’ll need to trust an agency that isn’t fully transparent.”