Oversight of media titans shifts to Omnicom during the second quarter
In the world of advertising, a debate is raging over the practice of principal-based media, a model where agencies, such as those under holding companies like Omnicom, buy media inventory outright and resell it to clients with a markup. This model, while reportedly contributing to Omnicom's impressive Q2 2025 results, has sparked concerns over ethics, client trust, and sustainability.
The principal-based media model raises several issues. Agencies, in their role as principals, may prioritise their profit margins over clients' best interests, blurring the traditional agent-client relationship. By both planning media buying and benefiting financially from the resale markup, agencies could potentially make decisions that are less transparent or favourable to clients.
Clients may also find it unclear how much they are paying versus what the agency pays for the inventory, leading to concerns about fairness and transparency. Critics liken the business model to practices such as high-frequency financial trading or front-running, implying that the system is overly complex and lacks transparency.
Industry voices argue that relying on principal-based media for profits is not long-term sustainable. It depends heavily on certain advertisers' tolerance and some media owners cooperating, with risk if clients push back against this approach.
Despite these controversies, principal-based media has been a key contributor to Omnicom's Q2 2025 revenue, providing incremental revenue with incremental margin due to Omnicom's ability to capture markups from outright media inventory purchases.
Omnicom reported a 3% organic growth and $4bn in revenue for Q2 2025, with the practice of principal trading identified as a significant factor. However, the controversy surrounding this model has not gone unnoticed.
Omnicom's CEO, John Wren, has an unusually open tone about principal-based media, confirming that it is a product Omnicom has had for a long time and continues to grow. Yet, Wren has also criticised competitors for lack of transparency on the subject during the Q2 earnings call.
Meanwhile, inside holding company boardrooms, there is a focus on what principal trading can deliver to this quarter's bottom line, with little appetite for soul-searching. Many holding companies pledge to investors they will invest more in proprietary media buying, but few are willing to disclose details.
The group's acquisition of Interpublic Group is expected to benefit Omnicom as it assembles one of the most vertically integrated media stacks in the industry. However, the debate about the sustainability of holding companies' reliance on principal-based media continues, with concerns about clients asking tougher questions, media owners pushing back, or regulators intervening.
As the industry grapples with these issues, the spotlight remains on companies like Omnicom, raising questions about the balance between profits and ethical practices in the advertising ecosystem.
[1] Incremental revenue refers to the additional revenue generated from a new source or activity, while incremental margin refers to the additional profit generated from that revenue after deducting the additional costs associated with it.
- The debate over principal-based media raises questions about whether agencies prioritize profit margins over client interests, potentially leading to decisions that are less transparent or favorable.
- Omnicom's CEO, John Wren, has been candid about the practice of principal-based media, acknowledging it as a significant factor in their Q2 2025 success but also criticizing competitors for lack of transparency.
- Critics argue that relying on principal-based media for profits may not be long-term sustainable, as it depends on advertiser tolerance and cooperation from media owners, with potential risks if clients push back.
- As the industry faces these controversies, companies like Omnicom are under scrutiny, with the spotlight on maintaining a balance between profits and ethical practices in the advertising ecosystem, particularly in areas like health, business, finance, and investing.
