On-air advertising opportunities on the auction block
The concept of auctions for advertising time and space is certainly nothing new. Back in the mid to late 1990s, companies such as Microsoft tried to create a marketplace whereby media sellers could put their time up for sale to the highest bidder.
The challenge has been to get the sellers, buyers, and, to some extent, the clients to participate. The success of Google AdWords, and to a lesser extent other paid search companies, has contributed to a resurgence over the past year of new auction opportunities.
The key players right now include eBay's TV test with the Oxygen Network, Bid4Spots in radio, SoftWave in both the TV and radio spaces, and companies such as Enversa for online. With so much success with its AdWords program Google has now ventured into the broadcast media world, buying up TV inventory and reselling to the highest bidder.
The reasons for the resurgence of the online media marketplace are twofold. The first is the ability for buyer and seller to interact via an online interface and the second is due to the amount of unsold inventory on radio and TV stations, cable networks and online properties.
Buyers see auctions as an opportunity to get deeply discounted rates to stretch their clients' budgets more effectively. The TV media have raised concerns that it will commoditize their offering - primarily with regard to television, as it takes away the day-to-day negotiations that allow for added value, bonus weight and other strategies that call for more than just buying spots. Clients and agencies have shown interest in these auctions, but very few TV sellers have given this much attention.
From the client and agency point of view, online auctions can open up new avenues and opportunities for placing their ads. Certain auction models like a reverse auction have the stations bidding for business, which drives down rates. For example, direct advertisers who have never used radio due to the lack of DR rates may benefit from a reverse auction model. In the past the cost-per-thousands (CPMs) may have seemed too high, but now by using the online auction model advertisers may garner very attractive rates that are a fraction of what is being offered in the open market. Therefore, reverse auctions are most likely used for clients looking for inexpensive tonnage and direct response advertisers looking to air at the lowest rates possible.
There are other auctions that are based on a more traditional bidding process, where multiple advertisers compete for specific inventory. It is believed that this auction model benefits the seller and will drive up pricing over time.
From the client and agency perspective the most important thing is always to get the right inventory at the right price. The strategic use of auctions can help facilitate this - particularly for inventory that is not in high demand. From the agency perspective, we believe that the reverse model holds the most promise since sellers are bidding for your advertising dollars.
However, testing all the options while the market is still in its infancy provides tremendous learning opportunities and the ability to influence the models as they are being created. Let the bidding begin.