Just as computers and electronic graphics have changed the creative end of the advertising industry, new technologies now hold out the promise of reducing paperwork on the money end of the business. With contracts signed electronically, fax machines may fade into the past.
That's the dream being advanced by the Television Bureau of Advertising (TVB) and a number of other organizations like the American Association of Advertising Agencies (AAAA). The growing reality of EDI or "electronic data interchange" is an overarching concept that involves moving the complete buying cycle to an electronic environment: initiating buys, negotiations, placing orders, checking spot fulfillment and billing.
The advantages of electronic invoicing is that payment can be done faster, errors are reduced and less time is spent doing paperwork leaving more time for selling.
"All the big stations in all the major markets are using it for national spot buys, and more stations continue to sign up," says Lenny Melamedas, executive vice president of Encoda Systems, a manufacturer of automation and traffic systems. All of Hearst-Argyle's 29 stations use EI and will soon be equipped with Encoda Systems' BIAS traffic system.
"We view the electronic invoicing process as something that will make the buying of over-the-air TV advertising as easy to transact as possible. Our stations are generating approximately 2,300 electronic invoices per month today," says Al Lustgarten, manager of information services at Hearst-Argyle.
While some are still reluctant to totally exit the conventional world of paper trails, there are few, if any, pockets of resistance for electronic invoicing. This is probably best reflected in the volume of EI-based transactions, which is increasing monthly. Abby Auerbach, executive vice president of the Television Bureau of Advertising (TVB), notes that in November, 560 out of roughly 1,200 TV stations nationwide were engaged in electronic invoicing. "In one month, this group of stations issued more than 30,000 invoices, which resulted from approximately $265 million worth of air time," she adds.
"In broadcast, the front and back ends are complete, but we have to encourage more stations to convert over to electronic invoicing," says Jeanette Schiavone, AAAA chairwoman of the EI committee and director of client accounting at New York City-based MindShare USA Inc., a WPP Group company. "At the same time, clients must agree to a paperless environment. We still see agencies requesting that stations send EI transmissions and a hard copy, too. That is ridiculous when a transmission has the ability to generate a facsimile document."
Auerbach says getting auditors to accept electronic invoices in lieu of paper is only part of what must be accomplished.
"We must get all sellers and buyers to replace the paper touch points within their internal processes with electronic connections," she says. "Streamlining back-room operations will lead naturally to more time for media negotiations and a more valuable result for both sellers and buyers." She adds that while electronic invoicing is an important component of EDI and that TVB is putting a lot of energy behind it, TVB is striving for a full end-to-end electronic solution.
"Our dedicated EDI committee is made up of senior people at the O & O and broadcast groups plus the sales rep companies," she adds. "This group is serious about EDI and meets monthly to facilitate education, development and cooperation."
The committee's activities are posted in the EDI Toolbox on TVB's Web site (www.tvb.org).
There are a number of components involved in EDI at the station and agency levels. Traffic systems, Web sites and other software tools are all part of the mix. One challenge is that different traffic systems handle electronic invoicing differently. One may compile data and "push" the invoice information to the agency at the end of each month. Another may send the data to a Web site, where the agency can go and pick up the information.
Despite the different delivery modes from traffic systems, there is a de facto standard for the electronic invoice itself under the auspices of the AAAA, which has created an ASCI text-defined field-format invoice. Its elevation to the status of an industrywide standard is seen as "a positive step" by Paul Levy, vice president of business development at AdValue Technologies, a wholly owned subsidiary of Reuters, which offers electronic invoicing.
AdValue offers an "AdValue Network" through its mediaworld.com Web site that allows the placement and management of media buys from start to finish. An AE (Ad Executive) Inbox for reps and stations helps them connect electronically with agencies using the AdValue Network.
"The processes surrounding media buying are complex and vary quite a bit," he adds. "MediaWorld is our B2B portal for connecting media buyers, reps and sellers and providing them with products and services geared towards improving these processes."
Cathy Crawford, executive vice president and director of local broadcast at Initiative Media, Los Angeles, observes that current efforts at Web-based buying services range from auctions of distressed inventory to more comprehensive services dealing only in one medium. The usefulness of these services, she believes, is contingent on greater integration of media and functions through a common language. Currently, she notes, none of them can be integrated with the Donovan Legacy system for back-room work.
"Many of them are using the XML language," Crawford points out, "but then there are companies like Donovan, whose systems are not written in any language like that."
In addition, the clients may also need to get involved. "Before we talk about the a future in a paperless world, we have to take the next logical step, and that involves clients. They have to embrace electronic invoicing as a much better way to proceed," says Crawford.
"Agencies need to make their clients comfortable, and this is not going to happen as long as some agencies remain uncomfortable with it, too. Agencies need to take this step. People have to realize that data can move error-free and that anything in electronic invoicing format can always be printed out," adds Schiavone.
Nonetheless, paperless transactions are showing gains. According to Levy, AdValue's services already handle well over $3 billion worth of business annually with a combined subscriber base of 1,200 agencies, reps and stations. With AdValue's www.mediaworld.com, users have three EI delivery options from which to choose, including direct delivery to an AdValue desktop client at the agency in question. If the agency is not an AdValue subscriber, invoices can be posted on the site and an e-mail notification will be sent to the addressee so that they can retrieve their EI file off the Web site. The third delivery option is routing invoices to other EI services being used by agencies. AdValue also offers its users access to an EI archive capability.
"There are a few invoicing services that still need to work with one another to allow all stations to reach all agencies," he says. "Solving the EI piece is the most easily accomplished task in the industry."
The EDI movement has also led to the creation of a number of online services that help facilitate the buying and selling of media spots over the Internet. Companies such as BuyMedia, eMadison and Media Passage are looking to bring the entire buying process to the Internet, not just parts of it. Their business plans call for data to be transferred electronically, including research, planning, avail requests, sales proposals, order placement and invoicing.
CEO Mike Jackson estimates more than a billion dollars will be placed this year through his company's marketplace system in radio, TV and cable. More than 1,000 agencies are signed up to receive electronic invoices through the system, and a total of 3,000 are using it for the avail process.
And more than 800 radio stations representing 80%-90% of regional and national advertising are signed with the service. Sellers pay license fees ranging from $400 to $3,000 a month, depending upon ratings and revenues.
Don Robinson, vice chairman and chief marketing officer at eMadison, an online service, says the savings online-service companies can offer are important. And former TVB President Ave Butensky, an eMadison advisory board member, explains that 20% of the effort of buying spot TV is in negotiation, while 80% is in the back-room process.
This situation isn't lost on Steve Grubbs, CEO of media-services company OMD, USA. His company is testing three online services and is enthusiastic about moving to a paperless operation. He says, "I don't see this as a bid-ask scenario where we actually buy online. I see it for the exchange of information-contracts, schedules and everything that's associated with schedule maintenance. I see negotiation continuing as a verbal process. I guess we could do this with a system of our own, but it would cost a lot of money to develop, and we still could find out that someone else has a better process."
For those who actually want to negotiate online, the eMadison.com service goes from avail request through an unlimited number of proposals and finally the submission of an order to the station's traffic system. The spot-TV service was recently being beta tested in Dallas with three stations, integrating the backend systems of four major agencies. Robinson says his company hopes to be in 20 markets by the end of the year and in all 211 spot markets within two years.
Next, eMadison plans a radio test of its service in San Francisco. Robinson notes, "A radio product will be easier to build because we will have had the experience with TV and, also, four or five radio groups have an enormous number of stations. If you can sell them, you have 60%-70% of the stations in the top 100 markets."
Another prospect is the quick rollout of a cable network service. He adds that discussions are being held with the three major rep groups to involve them in the service. While the exact cost structure for the service is yet to be decided, he expects his company to be compensated via a license fee to agencies and a combination of that, and a small transaction charge to sellers.
Another company in the new online buying market is Media Passage, which started out with a print service but became involved in spot radio last year with the acquisition of Broadcastspots.com. Carl Bryant, executive vice president and co-founder of Media Passage, reports the radio service, so far, involves avails integrated with Arbitron ratings for those who pay for the Arbitron service. This allows the buyer, for example, to search for stations by minimum ratings in specified dayparts and demographics.
So far, though, there is no revenue for Media Passage, because the purchasing mechanism is yet to be bound with the avail request. The actual buy is now done by phone or fax. Bryant says these mechanisms will be tied together sometime this year. At that time, he expects to follow the print model, where both buyer and seller pay a transaction fee. He estimates this will be well under 1% of the media cost.
There are no plans for a spot-TV service for this year, Bryant says. "More than likely, we'll start out with local cable and go from there," he notes.
Media Passage is engaged in a buy of its own, with its acquisition of OneMediaPlace expected to be closed this week, forming a new company, OneMediaPassage. Bryant says OneMediaPlace brings in a system of media "stores," where the seller can present his wares in a private exchange, limiting access to a specific industry or agency. Once the transaction process is in place, he adds, buyers and sellers will be able to negotiate rates and terms and also handle make-goods.
Another private exchange is offered by AdOutlet Inc., New York. While the service known as AdOutlet.com is an all-media public service, so far in nine markets, the private service is called Ad Media Solutions. The latter, launched a few months ago, "is the precursor to the public service really taking off, " says John Bordeleau, chief revenue officer. "As people become used to using these tools with their existing clients, these sellers will be more ready to go on the public exchange." In the private service, the sellers only do business with specified buyers. He says talks are under way with diversified media companies and reps.
Meanwhile, AdOutlet may offer its greatest attraction to direct advertisers and local and regional agencies that want to explore individual markets in depth. Bordeleau suggests it will appeal to larger agencies that send their buyers to the smaller markets to get expanded information. Each of the current nine markets is represented with information on all media in the market, including Web sites operated by local media and even taxi and elevator advertising. AdOutlet is addressing sellers with trade advertising and through its sales force. Avails, profiles and unique selling points are included.
The service is in the process of rolling out a total of 25 markets. The Web site allows negotiation, as well as posting of rates that are unique to a specific buyer and only seen by that buyer. Bordeleau claims several thousand buyers now using the site-a mix of various-sized agencies and direct buyers. Although he declines to state specific rates, he says revenue comes from the seller on a transactional basis. While this service is not integrated with backroom systems, he notes, there are negotiations under way for alliances that would provide this function.
Auerbach, however, tempers her enthusiasm because, at least currently, there is no true end-to-end EDI solution-something that needs to be worked out.
"Several EDI vendors are developing technology to connect station and agency legacy systems to each other," she explains. "Each of these competitors have a slightly different approach to the solution."
She does, however, add that there is one thing they do have in common. "None of their technology truly integrates with the legacy systems that run station and agency back rooms," she says. "Without legacy system cooperation and integration, there is no true end-to-end EDI solution. Right now, we have too much confusion and not enough connection."
THE EDI TRAFFIC COP
Another major component of EDI and electronic invoicing will be the station trafficking system. And vendors of those systems are already getting involved because the benefits make too much sense.
"This is not rocket science," says Melamedas. "It's a practical solution that works well. It has become a no-brainer for both sides of the street."
Encoda, for example, offers a Web site called Spotdata.com, a standards-based system that carries information from any TV traffic system to any agency system. Spotdata.com will be integrated into the workflow tool kit offered by Encoda Systems that now includes the ODAC platform, which Encoda acquired earlier this month. According to Encoda, the ODAC platform upgrades the entire chain of communications linking buyers and sellers, while allowing for the ongoing analysis of the complete transactional flow and its outcome.
"We charge a dollar per transaction," he says. "Even with this fee, there is research data in the market place, which points to the fact that stations don't just save money via EI; they actually make money doing it."
Melamedas described Encoda Systems' new Electronic Order Management (EOM) as a system which streamlines the media buy-sell process. In effect, it allows the user to electronically manage the order through its entire life cycle, including populating and synchronizing databases.
"In addition to EOM, we see mechanisms for managing negotiations for the buy itself taking shape. This will be part of our tool kit for managing the workflow of traditional, converged, addressable and interactive campaigns. As the world moves to where media placement can occur anywhere, including portable handheld devices, we plan to provide tools that will help buyers and sellers manage the ever-changing landscape," says Melamedas.
Auerbach adds that the purchase and integration of ODAC into Encoda Systems is a forward step in the development of full end-to-end EDI. "While ODAC may develop integration into several of Encoda's station systems, the agencies (represented mostly by DDS) and non-Encoda traffic systems are still not connected," she notes. "TVB is encouraged to see Encoda working on end-to-end EDI but stresses the importance of maintaining open connectivity among all trading partner systems, and we continue to encourage the development of additional solutions."
W. Lowell Putnam, president/CEO of VCI, another traffic system manufacturer, says VCI is already involved in both electronic contracting and electronic invoicing. "Contracts can be sent electronically from a national sales rep's system directly to our VCI Sales Desk system, which integrates directly with our STARS II+ traffic system," he explains. "Using Sales Desk, a national sales manager or sales assistant can check current availability, get contracts approved and schedule spots in real-time. Once the spots air, invoices are generated automatically by the STARS II+ traffic system and can be sent electronically to the agency."
He adds that it's extremely important that broadcasters understand how their current systems and processes will help or hinder them as they move forward with any form of EDI.
"A station's traffic system, for example, plays a pivotal role in EDI because it's the only system that touches the entire revenue stream from order entry to scheduling to invoicing," he explains. "A traffic system that is open and based on standards such as Microsoft Windows NT, ODBC, XML and HTML is more likely to support current requirements, as well as future forms of EDI."
Ad agencies seem more than happy to jump on board. "As far as our agencies are concerned, the more electronic invoices they get, the happier they are," says Pat George, senior vice president and e-commerce coordinator at Donovan Data Systems (DDS). "Creating the EI file was a slam-dunk. On the other hand, creating a transport mechanism for EI was seen as a big challenge until a standard platform emerged last year. Soon, we will see EI in the radio industry, too."
The traffic systems sitting in the station are being complemented by a number of Web sites that are based on the agency side. For example, DDS has www.donovandata.com. DDS clients include advertising agencies, media independents, advertisers, rep firms, TV networks, studios and PR firms, and, according to the company, its systems processed 70% of the national spot advertising dollars purchased in the U.S. in 1999, accounting for more than $23 billion via 800 million online transactions.
While George is happy with electronic invoicing, there is one important factor with which to contend. There's a fundamental difference between how electronic invoicing changes invoicing processes, and treating the paperless transaction in the same way as the paper transaction is simply not possible, according to George.
"Audit issues loom large. Without paper, should electronic invoice documents be kept? Where and for how long? After invoicing, you can look down the work-flow path to identify other electronic invoicing efficiencies and opportunities, but you need to be mindful of audit and accounting considerations as you do that," says George.
But, audit issues aside, the move to electronic invoicing will help reduce discrepancies, and Auerbach points out that reducing discrepancies is a major benefit. The average large ad agency handles 15,000 to 20,000 invoices each month from local ad spots, and more than 50% of these arrive at the agency in question with discrepancies.
"Many of these discrepancies are due to human error at the time of input. Electronic invoicing not only reduces the number of errors, but it also facilitates rapid reconciliation," Auerbach notes. "When we can couple electronic invoicing with full EDI, we expect to eliminate invoice discrepancies."