And nobody is more aware of this than San Francisco startup Adauction.com, which just held its third ad auction in late April. Already Adauction.com (www.adauction.com) is showing the company has learned from others' mistakes.
By using Imgis' ad-serving and tracking technology and automating the bidding process with a system from Moai Technologies, the staff is freed to service publishers and advertisers.
Adbot, which closed in December 1997 when its owner was charged with fraud and embezzlement by the Securities & Exchange Commission, had early problems serving ads using its own technology, and conducted labor-intensive auctions on a trading floor.
A VOTE OF CONFIDENCE
Another vote of confidence for Adauction.com comes from the more than 45 Web publishers registered, including retail auction site eBay; software download site Jumbo; Web directory LookSmart; financial site Market Guide; and city guide and directory site Zip2.
Some 150 media buyers are also registered from agencies, including Anderson & Lembke, San Francisco; Bates Interactive, New York; and Modem Media, Westport, Conn. At an April 23 auction Adauction.com sold $100,000 to $200,000 in ad space, said founder and CEO David Wamsley, adding the company is on track to top $7 million in revenues by yearend.
"We sold May advertising space that would have gone unsold," Mr. Wamsley said. Web publishers "love us," he said, especially when cost-per-thousand impression rates go over $10. Some sites are earning CPMs up to $13.50.
In April, Adauction.com also introduced two new features: morning and afternoon sessions, and an automatic extension, which is triggered for as long as people bid on ad space in 2-minute intervals. Both features are meant to address the fact that up to 70% of all bidding activity takes place in the last 20 minutes of the auction.
Jinjee Garrick, advertising buyer for retail auction site Z Auction, Calabasas, Calif., said that site scaled back its advertising except for buys on major search engines and Adauction.com.
She said she likes the simplicity of buys at Adauction.com.
Before, "I was advertising on 30 sites, with 30 contacts, 30 different places to send ads to, and I'd get 30 different reports every month," Ms. Garrick said. "Adauction consolidated that down to one bill."
Ms. Garrick bought ad space on Jumbo and Internet Travel Network and said the prices were bargains. Through Adauction.com, she paid $5 CPMs for space on Internet Travel Network, while the same space was $15 when she approached the site directly.
Owen Van Natta, senior director-network advertising at Zip2, said he participated in the first two auctions and was pleased that when he expected to sell 100,000 ad impressions, Adauction was able to sell 300,000 impressions.
A DEFINITE NICHE
He said Zip2 also chose Adauction.com over ad networks because it preferred to be sold as Zip2, rather than clumped into a category and sold. "We wanted to make sure not to devalue ourselves by becoming part of a demographic group," he said.
Mark Peabody, research analyst at Aberdeen Group, Boston, said most of the media buyers he has interviewed have used Adauction.com to reach beyond the top 100 trafficked sites. It's easier for them to let Adauction handle small buys on multiple sites, he said.
Mr. Peabody said leftover inventory is also a major issue, as long as Web ad impression inventory continues to outstrip demand for the next few years. He estimates that up to 40% of most sites' inventory goes unsold.
Ironically, this could be Adauction.com's greatest challenge, he said. The company will need to convince sites "it's a legitimate place to sell your advertising -- that you can get $30 CPMs here."