The idea of a stock-exchange-style market that allows advertisers and media owners to trade TV spots has been raised periodically for decades, but always laughed off as either impractical or a crackpot theory from those who don't fare so well in upfront negotiations.
Cheerleading from Wal-Mart
Now it looks a little different. Its proponent this time around is the world's largest retailer, Wal-Mart -- led by its firebrand senior VP-marketing communications, Julie Roehm. She will meet this week with a cadre of other major marketers, with combined media budgets of over $2 billion, to lay foundations for an auction-based online trading system. What's more, Google, which has piloted some online-media trading systems, is one of a handful of potential technology partners that have demonstrated to Wal-Mart how such a system could be built.
There could be strong demand for such a system today. The mushrooming of available video inventory is making it increasingly difficult for the media agencies to manage and organize their purchases. Accordingly, the proposed auction system -- while not fully fleshed out yet -- would not be about taking down the upfront, but would actually be more likely to result in a bifurcated TV market. Must-have shows like "CSI" and "American Idol" would still be at the heart of complex, multifaceted upfront deals and personal negotiations, while less-in-demand inventory would be turned into more of a commodity traded via auction.
"The time is right to explore it," said Tim Hanlon, senior VP-ventures, Publicis Group's Denuo. "There are two types of ad inventory. If I'm a marketer, I need to be in both."
The group of marketers involved in trying to create the auction system includes Microsoft, Hewlett-Packard, Lexus, Philips and Masterfoods, as well as Wal-Mart. At least four others are thought to be involved, and Wal-Mart is looking for the players to kick in a combined $50 million to get the ball rolling. Initially, of course, that kind of budget would only allow for a pilot project with perhaps just a solo cable-channel partner being involved to sell their spots via the new system. But it would also clearly be a way of testing a system that could be easily scaleable.
Not all marketers are enamored with the idea, however.
Andy Jung, senior director-advertising and media, Kellogg North America and a member of the ANA TV Committee, said he doesn't believe the online auction would help the media-buying process. The online auction, he said, would cut out some of the necessary conversation and, potentially, turn a "very complex business" into a "commodity."
"The question is, 'Is this system they're proposing flexible enough to accommodate our marketing needs and objectives,'" said Debbie Myers, VP-media services for Yum Brands' Taco Bell Corp.
No support from P&G
Procter & Gamble Co. wouldn't comment but it's believed to be one of a number of top TV spenders to be firmly against the idea. P&G has some of the best economies of scale in the business. And as one of the oldest and biggest players in the market, the company will be reluctant to allow others to share those benefits.
But smaller marketers have their own reasons to be wary. "It reminds me of Major League Baseball, where they have a revenue-sharing plan in place but the rich still get richer," said a marketing chief at one pharmaceutical company. "I mean, look who's driving it: Microsoft, HP, companies at the top of the food chain. In our industry, we spend a tenth of what a Pfizer spends. I'm not sure we'd want to get caught up in a bidding war, if that's what it came down to."
Those on the front lines of emerging media, however, see merit in the idea.
Favoring a test
Chrysler Group's Christine MacKenzie, executive director-brand and agency relations, is one in favor of the plan and would like to see a test of such a system. "Chrysler Group strongly supports any model that enables us to lower our media costs and allows us to better target our media spend," she wrote in an e-mail.
Anita Newton, Sprint's VP-media, views the proposal as a much-needed test. "If nothing else, it helps us learn and at this stage of the game, that's the right way to think about it."
Initially, the marketer group behind the auction plan began with talk of how to replace the upfront, then discussed the possibility of setting up an exchange involving the broadcast networks, but settled on a much smaller plan involving trades of airtime, possibly on digital cable networks. A steering committee is set to meet May 17 to nail down details of the auction plan.
Contributing: Ad Age staff