OnLine Media Auctions .... Coming of Age
Action by a group of heavyweight marketers, led by Wal-Mart and facilitated through the ANA, provides a healthy break in the clouds that have been hanging over this initiative for several years. A call by Wal-Mart's Julie Roehm to pool $50 million for the development of a market system and test will likely be met with resistance from major media outlets and major agencies.
That comes as no surprise given a similar test that proved successful, by HJ Heinz with Ariba several years back, seems to have been squelched when major media properties turned up the heat.
But several years and $50 million can make a difference.
While Julie Roehm and 10 other marketing partners will ante up the $50 million pool, we question the need to "reinvent the wheel" when reverse auction models have already made significant headway and investments into the framework and process that drives such models. The focus should be on process refinement across all media formats.
Enversa, funded by IMC2, is one such outfit that begs a hard look. Pouring millions into process development harkens back to the days of Mediaport .... a failed multi-million dollar attempt by major agencies to re-write agency process for the creation of a new-age, agnostic, enterprise-wide management system.
The marketers are to be applauded for this bold, visionary step forward. The ANA has the dedication and diversified intellectual capital to facilitate the experiment. But both marketers and the ANA should not attempt to pull this off without the benefit of agency and media partner input. And at the very least it should review models that are already planted in the marketplace and not rely solely on the Google's of the world to do so.
Posted by Paul Benjou Permalink

3 comments:

richm29 said...

A Nasdaq-style market is possible, but only if all parties' needs are met. From the advertisers point of view, they want the most efficient market, i.e. they want the prices for inventory to find their bottom.

The networks want the opposite. They want prices to find their highest potential, and they have to sell all the programs that make up their time periods. Currently, they package programs together so the lesser programs can be sold with the better ones. What incentive is there for the networks to put their individual programs out to bid?

Both parties can win in a secondary market. If the networks would allow an open secondary market for inventory (i.e. they give up control after the initial sale), then individual programs can be bought and sold like stocks are bought and sold on the market, and prices would reflect the market's valuation of each program. In return for giving up their control, the networks should be relieved of their obligation to provide cpm guarantees.

Program producers would have to share interests in the program. Their incentive must be to insure that each program is the best it could be in order to maximize the value of the program in the open market, and therefore maximize their return on investment.

If all parties' needs can be met, the processes and procedures of a market system will be the least of anyone's worries.

12:29 AM
Paul Benjou said...

Rich -
You are right to suggest that a secondary market will make it easier for the media to ease into the auction concept.
This would, however, transfer the risk onto the shoulders of the marketers who may seek relief from inventory they consider inferior for their needs.
A secondary market may also become stigmatized with second-rate inventory which would not, necessarily, help it.
These are but a few of the kinks that need to be worked out, but the overall concept is sound and it is just a matter of time before acceptance provides another alternative.

12:11 PM
richm29 said...

Paul,

You’re absolutely right; this would transfer the risk from seller to buyer, as it should, just as a buyer of stocks on the stock market assumes the risk.

And, yes, the market may become populated with “second-rate” programs whose value would sink to their deserved lows. Isn’t this a better alternative than propping up all this makegood fodder by loading them into packages that advertisers buy just so they can get the premium quality programs?

But it won’t be just the second-rate programs that hit the market. Advertisers frequently unload their inventory to meet their changing needs. Suppose an advertiser bought a (new) quality program that had a value of $300k to start. Suppose the advertiser later decided to sell it to manage their expected advertising to sales ratio, but by then the value of the program rose to $400k or more. Puts a new twist on advertising ROI, doesn’t it?

BTW, I think eBay was absolutely the wrong choice for this test system. This shouldn’t be looked at as an “auction” market. This should be looked at as a trading market. E-Trade would have been a better candidate.

Rich

11:20 PM

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