Ad Marketplaces
Google’s almost billion dollar pact with Murdoch’s News Corp and AOL’s accidentally opening of the keyword kimono stole thunder, and in case of the first perhaps intentionally, from one of the most potentially disruptive trends in traditional media. The “upfront” is a process I cannot begin to understand. Seven years in online has shed no additional light on the manual, presumably inefficient, but incredibly lucrative process by which TV air time gets sold in advance of the shows running. The money committed exceeds all of that spent on online in a given year, I believe, which helps put the magnitude of the deals in perspective. It’s a process that according to one article has not changed in years despite advances in technology, new mediums, and shifts in consumer consumption. Thanks to several advertisers and eBay this might soon change.
The company that redefined how people bought and sold goods announced a little less than a week ago that it planned to create a marketplace for buying television airtime. If successful this new process could dramatically alter the TV ad buying landscape. This site built by eBay and run on a domain unrelated to the auction company’s core business. Going to the site now, Admarketpilot.com, shows only a basic form page. One can only assume that the actual site will have more on it than a poor looking lead generation page. Design cheap shots aside, what makes this particular marketplace fascinating is that it’s driven by the spenders, not by the suppliers.
The companies behind the TV ad marketplace include some of the biggest advertisers and corporate heavy weights – Toyota, HP, Microsoft, Wal-Mart, and Home Depot. Together these companies spend not millions of dollars but billions of dollars in television advertising. Yet, at least from the sound of it, they are held captive in a process that naturally looks to get the most out of them without giving up much in return. As the Wall Street Journal says, “Networks keep advertisers in the dark about demand, leaving media buyers to pick up scraps of information as they bargain. Prices are often based on what an advertiser has paid in the past, rather than purely on demand.”
Imagine negotiating prices for inventory months in advance and paying without true guarantees and with the real possibility that what you purchased might not come close to what you expected. This heavily skewed system continued because no options existed to force about a change. Advertisers most likely felt trapped, and while they didn’t like it, they didn’t have any real alternatives. No doubt that buying online and the shift in power towards accountable spending have played a huge part in advertisers pushing for a better way. Combine the market trends with the ability to create an instant marketplace, and an opportunity for true change and innovation actually exists. With respect to television, this change is just in its infancy, but we are witnessing the beginning of something big.
Those in Internet advertising face a similar but different set of challenges. Fortunately, supply and demand of online inventory is fluid, quick changing, and quite liquid. Unfortunately, there still exist many gaps where supply and demand do not get matched together as efficiently as possible. Thanks to rapid development cycles and the ability to quickly innovate, companies have already started to try and address the inventory inefficiency issue with specialized marketplaces that resemble, at least in theory, the one to be used for a small slice of the television advertising market.
The TV ad marketplace only validates the efforts of the online ones, and it certainly makes me excited to see how we might solve the inventory inefficiency problem. Much as keyword bidding happens on the major engines, once the online marketplaces gain traction it won’t be long until a similar type of bidding can take place for display inventory. As is likely to be the case with TV, the marketplaces will not handle all inventory. Even though an auction model tends to produce the maximum price, relationships always have, and still will play a role for some of the spots. At the very least though, once enough of the various inventory sources can connect on a unified platform, we will see better monetization and access the tail of the sites.
Last week, we focused on the state of remnant advertising. This week we see the makings of a way to improve it. With a widely enough adopted marketplace, we can start to make some progress on the remnant problem. The question is, will it be eBay or someone else that decides to band together the inventory. With TV, it was advertisers pushing. With Internet, it’s more likely to be inventory driven as the number of spots and the complexity of the market is so much greater.
