May 11, 2006

Some of the largest advertisers in the US plan to move the ad industry out of the dinosaur era and into the fast Internet age. Some industry observers think some big companies with deep pockets could be looking to design an online advertising exchange where advertisers and media owners can easily buy and sell Internet ads.

For now, eBay and Google are perceived as the front runners, with eBay leading. It is estimated that the annual global advertising market could be worth up to $800 billion. And Google CEO Eric Schmidt recently boasted that he expects to get his fingers in every piece of it! Today, at a conference of the Association of National Advertisers, this group, led by Julie Roehm of Wal-Mart, asked ANA members to put up $50 million to test a trading system for traditional media.

Howard Rosenberg, director of trading platforms for eBay, was on hand to demonstrate such a system that eBay has ready to go. The group, which includes Raymond Warren, president of Carat Media Group Americas, Steve Grubbs, CEO of PHP USA, Ann Bybee, corporate manager of advertising, brand and product strategy for Lexus USA, and Michael Keel, vice president of advertising for Philips Consumer Electronics, looked at four potential partners, including Google and eBay.

But it’s eBay that’s been featured in the dog-and-ponies that the group has presented to the ANA over the last year. “EBay is more of the pure play,” Warren said, and it has the scale. In his opinion, if the $50 million test went forward, it would go on eBay’s platform. But Keel said that Google still is in the running. These top advertisers hope to replace the television upfront system, in which advertisers must bid on a year’s worth of broadcast spots each May and June, with a rear-round electronic exchange. Ultimately, they believe all media should be bought and sold through an ADSDAQ. In the short term, they hope to start with less critical buys.

“The upfront is on the tip of everybody’s tongue,” Roehm said. “By breaking it into smaller chunks, [starting with] something less overwhelming than the upfront, we can do it.” EBay already operates independent auctions for Sam’s Club members to bid on merchandise; the OnePass online auction where Continental Airlines frequent flyers can use points to bid on products; a site the government of Mexico uses to auction off surpluses; and PrimeSeats, an online exchange for event tickets.

Meanwhile, Google has been working to extend its own search advertising platform to other forms of media. It’s auctioned off space in print magazines and hopes to expand the reach of Dmarc, its subsidiary that sells remnant radio advertising. Advertisers have many beefs with the upfront, Bybee said. It’s difficult for advertisers to know whether they’re getting a good price. Advertisers don’t always know their business needs a year in advance, especially problematic because the upfront extends into the next calendar year. And programming often changes over that year.

“Some of the shows you thought you bought don’t make it, and you’re left with less than what you bought upfront,” Bybee said. “Make-goods signify a bad deal in the upfront, and these days more shows don’t make it.” Rosenberg advised the ANA audience to think about “eating the elephant in bites.” Instead of planning to move all media buying online, start with something simpler and let the marketplace determine what should be automated electronically in the future.

There’s certainly a lot of fear in the ad industry at the idea of moving to a “transparent” platform, where the cost of each spot on “Lost” is as clear as the cost of a bobble doll on eBay.

“A bigger fear many people have is seeing media changing so quickly, faster than at any other time,” Roehm said. “We can wait and let it impose itself upon us or test things and see what happens.”

Source: The 360 Blog