Throw Out the PaperworkAd industry pushes for electronic trading of media buys 2/10/2006 07:00:00 PM Eastern
Madison Avenue has long desired a better way to make ad buys than the labor-intensive, error-prone and largely paper-based process it uses today. A recent push by the ad industry aims to do just that by creating an electronic marketplace in which buyers and sellers can trade media time and space with the same efficiency as Wall Street’s electronic exchanges.
The foray is revealing some strange bedfellows—and some ironic developments. A few weeks ago, a group of the largest national TV advertisers heard a pitch from online auction service eBay, which would like to develop an electronic exchange for swapping advertising time and space.
The presentation was made to the Association of National Advertisers’ (ANA) influential Television Advertising Committee, which has quietly formed an informal task force to explore whether the industry can and should create Madison Avenue’s equivalent of the Nasdaq exchange. The concept was first proposed by DaimlerChrysler Director of Marketing Communications Julie Roehm.
Roehm’s proposal generated plenty of headlines. Although the buzz has subsided, the committee has been working behind the scenes, vetting the concept and meeting with other alternative “solutions providers.”
GOOGLE’S SECRET PLAN
One of those is believed to be Google, which itself has been dipping its toe into traditional-media waters, testing the brokering of print-advertising space and, more recently, acquiring dMarc, which lets advertisers place radio buys on stations electronically. Radio giant Emmis has already signed up with dMarc specifically to gain access to the ad budgets of Google’s advertisers.
Google’s plans remain a mystery to Madison Avenue, but the company has been clear about one thing: It wants to utilize its grasp of technology, massive market capitalization and substantial cash resources to help advertisers better buy media.
This is not the first time well-capitalized, new-economy players have tried to create an electronic marketplace for Madison Avenue. In creating Enron Media Services, Enron was attempting to do for the ad industry what it had done for the energy business: create an electronic trading system incorporating hedge techniques that would mitigate the risk for both buyers and sellers of media. Enron, of course, went out of business but not before it captured the attention of big advertisers and media companies.
Food giant Heinz attempted to utilize what many believe to be a precursor to eBay’s initiative, an online auction via Free­markets.com (now Ariba.com) that put a portion of its network-advertising buys up for bid. The “reverse auction” awarded the buy to the lowest bidder.
Interest in online trading subsided with the bursting of the dotcom bubble, but the ad industry’s hope for creating electronic systems did not. Three of the biggest agency companies—Inter­public, Omnicom and WPP Group—formed Mediaport to create standards for transacting media buys online.
Mediaport ultimately folded, but the groundwork provided a jump-start for some media, especially local broadcast and cable TV. Both the American Association of Advertising Agen­cies (AAAA) and ANA are pushing to make it happen.
The main reasons, said Greg Smith, executive VP/chief information officer at Universal McCann, during a recent AAAA conference, are that paper-based media buys drive labor costs and create greater margins of error than electronic systems. “Why am I paying for this? Why do you have people rekeying invoices?” Smith said, describing the complaints agencies get from clients.
LOCAL TV IS READY, INTERNET NOT
According to a report by the AAAA, local broadcast TV, thanks to the efforts of the Television Bureau of Advertising (TVB), is the most compliant and has achieved all nine key criteria demanded by the ad industry. National and local cable, thanks to a corresponding push by the Cabletelevision Advertising Bureau, is close behind.
“We’ve completed the schema,” TVB Executive VP Abby Auerbach announced during the meeting. She also noted that advertising agencies have begun contacting TV stations directly to jump-start the electronic buying process.
The meeting also revealed an ironic development: The medium least capable of trading online, and most prone to errors, is the Internet. “From an e-biz stand­point, we’re just not ready to tackle these things,” Jeremy Fain, director of industry products for the Interactive Advertising Bureau, acknowledged during the AAAA meeting.
“E-biz” is Madison Avenue’s term for electronic trading and replaces the older “electronic data interchange.” Whatever it’s called, e-biz will be a major topic of discussion at the AAAA’s annual media conference in Orlando, Fla. March 1-3.
Aside from the inability to trade online, Fain confirmed, the Internet has one of the worst “discrepancy” rates of any advertising medium. (Discrepancies occur when ad buys don’t match agencies’ and advertisers’ original orders or invoices, mostly due to human error.) Much of the time spent in paper-based trading is involved in so-called discrepancy resolution.
“Is it important for us to do electronically? It absolutely is,” said Steve Grubbs, CEO of Omnicom’s PHD media agency. “Are we ready to do it? I’m not sure, and I’ll point the finger squarely at ourselves. None of us have pushed hard enough for this to make sure we have the internal systems and infrastructure to make it work. We need to do this as an industry, but we still have issues in our own companies.”