Media buyers are not immune to the advent of trading exchanges.
OneMediaPlace, San Francisco, has set its sights on reshaping the often arcane and relationship-based media buying industry through an Internet trading exchange. The company, formerly AdAuction.com, on April 24 landed $25 million in venture funding from b-to-b powerhouse CMGI Inc., and changed its name to reflect the broad market it hopes to serve.
In making the moves, OneMediaPlace is expanding its focus. AdAuction.com, launched in 1997, was primarily an Internet site where media buyers could bid on remnant print, Internet and outdoor advertising. The renamed company will put its resources to bear on a one-stop media buying site, where prime-time radio and TV spots can be sold just as easily as a billboard in Biloxi, Miss.
"We want to be Switzerland," said Jerry Machovina, OneMediaPlace president and CEO. "We are here to raise the overall efficiencies on the buying side and the selling side."
Although OneMediaPlace looms among the highest-profile, best-funded media buying sites, a number of competitors are also in the running. The list includes Media Market Makers Inc., which has backing from industry powerhouse McCann-Erickson Worldwide. Also competing are mediapassage.com, BuyMedia Inc., AdOutlet.com, upstart Enginehouse Media, and, to some extent, such advertising networks as 24/7 Media Inc.
If effective, the sites could deliver better prices on the estimated $400 billion spent on international advertising annually, and remove many of the costs in transacting business between media outlet and buyer, experts said. All of the sites provide some combination of request for proposals, fulfillment of advertisements, trafficking, scheduling and insertion.
OneMediaPlace, which currently counts about 60% of its business from Internet advertising and 40% from outdoor, will charge a commission of 5% to 30% on the ad buy. The charges will vary based on the type of media and the amount of services OneMediaPlace provides, Machovina said.
About 10,500 media buyers are registered for the service today, while 300 to 400 sellers are also listing on the OneMediaPlace site.
"There are two ways to improve the bottom line for both parties: Cut costs and improve the process," said Dennis Wong, president and COO of Media Market Markers.
Wong's firm is looking to broker transactions between Internet sites and direct response advertisers, while reporting on the efficacy of the campaigns it brokers. It charges about 15% of the total buy for its services.
"In many ways, all of the [emerging] exchanges are providing similar services with different nuances," Wong said.
Expect a shakeout
Similarities among the exchanges don't bode well for the group, said Mark Rosenberg, an analyst at Giga Information Group, Cambridge, Mass. He said a shakeout is bound to happen as the market establishes itself.
"Niche players will have room, but I don't see why multiple trading exchanges doing the same things will be able to compete," Rosenberg said. "That's why we're seeing a number of small companies trying to get as many trades as possible right now."
The idea of an all-encompassing trading exchange came late to the ad industry, Rosenberg said. After all, the automotive, steel and plastics industries have long been in digital dealmaking.
Advertising has been slow to take shape because media buying tends to be very parochial. Outdoor media buyers tend to buy only outdoor, while TV and radio buyers stick to their media, he said. Also, advertising doesn't have as many enterprise resource planning systems, which are considered ripe for hooking into Internet platforms, Rosenberg said.