This wasn't your typical auction.
There were no frenzied brokers racing to outbid each other. There was no auctioneer calling out bids at breakneck pace. And there were no telephones ringing off the hook with buyers demanding last-minute orders.
Instead, the Internet industry's first-ever open-outcry auction of Web advertising impressions, hosted earlier this month by Chicago-based Adbot, was an unexpectedly sedate affair.
Seven twentysomething brokers sat calmly by phones, executing the orders of 18 bidders who represented agencies, media buyers and advertisers.
Not surprising for an Internet-related event, the most activity came from a band of five techies who were trying to resuscitate the RealAudio and RealVideo feeds that were supposed to go to the company's Web site.
Adbot, a Web media brokerage company, spent the past month assembling buyers and sellers for its first auction. Some 90 Web sites--including Four11 and USA.Net--sold impressions for an opening bid of $5 per thousand; 18 buyers, including Western International Media, bid on the inventory.
Lasting about 25 minutes, the auction sold only one-quarter of the 107 million ad impressions that were offered. Early last week, more than 70 million impressions still remained on the block.
While it wouldn't be fair to deem the process a failure, it's apparent that the auctioning of Web media will take some time to develop into a valuable service.
Adbot said it will purchase all excess inventory remaining after April 25. Bidders also have the opportunity to buy unsold impressions at $5 per thousand until that day.
`HESITANCY AND FEAR'
"There's always a mentality of hesitancy and fear at the beginning of any new concept," said Jim Frith, Adbot's president and founder and president of the Chicago Partnership Board, a 100-person firm that auctions financial intangibles such as real estate deeds and investment trusts. "I know that people are initially leery of participating in an auction for intangible goods. . . . But it just takes some time for the players to come around and feel comfortable with the idea."
Adbot takes a 15% commission from each transaction, but Mr. Frith said he doesn't expect the company to turn a profit within the next year.
Adbot organized the impressions into five networks: arts & entertainment, business & finance, sports & leisure, computers & Internet and search engines & directories.
"Selling impressions for the first auction was more of a test than anything else," said Steven Suslow, manager of strategic alliances at USA.Net, which had more than five million impressions still on the block at press time. "Future participation in auctions will be dictated by the overall availability of our inventory."
Adbot plans to hold an auction on the eighth business day of each month.
Next month's auction will include twice as many categories (like health, shopping and music), so advertisers can better target their buys. Opening bids will also be changed: Impressions in search engines and directories will start at a $4 CPM, while those in finance and investing will start at $7. All other categories will stay at $5.
Adbot also soon plans to hire an auditing service.
Kent Valandra, exec VP and director of new media at Los Angeles-based Western International Media, bought more than five million impressions at the auction.
Although some impressions were bought for specific clients, Western plans to peddle the bulk of them to its client base.
"We bought because they were outstanding deals, and while clients were keen on the idea at first, no one was ready to make a decision before the actual auction," said Mr. Valandra, who also is experimenting with Flycast, a company planning virtual Net ad auctions.
"I think auctioning Web space is here to stay because with such low overhead, auctions can replace rep networks for many sites," Mr. Valandra said.
Western's clients include a handful of large marketers, as well as several ad agencies, including San Francisco-based Black Rocket.
Most of the auction participants seemed to be smaller shops and marketers. Dish Direct (http://www.dishonline.com), a Dallas-based online retailer of satellite dishes, bought a million impressions at a CPM of $5.10.
"At such low CPMs, it's not too much of a risk to participate," said company President Dan Ratcliff. "We only need to generate about 100 sales from the buy for it to be worthwhile."
Jeff Field, president of NameSecure, a San Francisco-area company that secures domain names for clients, said he was somewhat disappointed with his auction experience.
Mr. Field bid $3.50 for 500,000 impressions in the computers & Internet network, only to see Adbot guarantee publishers a $5 CPM after the auction ended.
"$3.50 per thousand was the real market for impressions because they were nowhere near selling out," said Mr. Field, who was upset that Adbot had changed the rules before giving his $3.50 bid a chance to work its way through the process and be outbid by a buyer other than Adbot. "I'm giving plenty of thought as to whether or not I will participate in next month's auction."
Copyright April 1997, Crain Communications Inc.