INTERACTIVE: ONLINE BUYING MOVES TOWARD A VIRTUAL MARKET: STARTUPS PLAN NEW SYSTEMS TO LET AGENCIES BID ON SITES' AD INVENTORY

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Two new Internet companies could revolutionize the way advertising is bought and sold.

Or, more likely, they could just be high-tech peddlers of the Web equivalent of seconds, selling off unsold inventory at fire-sale prices.

Flycast Communications Corp. (http://www.flycast.com), a San Francisco startup, today unveils AdAgent, a software package that enables ad agencies and Web content providers to conduct transactions in real time. At least seven ad agencies and five Web sites will test the service.

Narrowline (http://www. narrowline.com), another San Francisco startup, is testing a similar service, dubbed Brought to You By, with agencies and such content sites as the Chicago Tribune.

SIMPLIFYING ONLINE BUYING

Both companies hope to turn the difficult task of buying media on the Internet-trolling to find sites for appropriate demographics, planning campaigns, measuring response with inadequate tools-into a simple, hands-off business of matching up the right ad with the right site at the right time.

While the systems share some similarities with ad networks like DoubleClick and ad management software like NetGravity AdServer, they can better be compared to financial trading markets.

"It's an Internet media transaction system," said Tara Lemmey, president of year-old Narrowline. "It's a lot like Sabre or an electronic marketplace like NASDAQ."

In the case of Flycast, the system's vision and scope is extraordinary.

USING SMART AGENTS

Using the company's software, an agency will input information about the target audience, the sites the ad should appear on and the price the advertiser will pay. A Web publisher will, in turn, input information about its available ad inventory and pricing.

A smart agent will then serve up the ad when a visitor who meets the advertiser's specifications appears at a content site. There's no haggling over price; the lowest bid gets the ad.

Both Flycast and Narrowline tout their ability to reach precise target audiences and provide accurate measurement and reporting.

"Everyone is talking about the Web being one-to-one marketing, but content providers are using a rate-card approach," said Larry Braitman, Flycast VP-marketing. With the Flycast system, agencies "are buying exactly what they want and what they need to reach their goal."

Less is known about Narrowline, founded by Ms. Lemmey, a former ad executive with Young & Rubicam and Goldberg Moser O'Neill, and Eric Theise, an academic with a Ph.D. in systems and management science.

A Tribune executive confirmed the newspaper's plan to use the system, but declined to provide further details. Ms. Lemmey declined to discuss other agencies or content sites testing the system.

CUT-RATE PRICES

Those who are testing the services-particularly Flycast-say they will most likely use them to unload banner ad impressions at cut-rate prices.

"They're positioning themselves as a sophisticated network buy," said Alex Flagg, online media supervisor at Anderson & Lembke, San Francisco, one of the agencies testing the Flycast service. "The real advantage, though, is that it is remnant space and you're getting it at a lower CPM than you would normally pay."

Other agencies planning to work with Flycast include J. Walter Thompson USA, San Francisco; Western International Media, Los Angeles; Dahlin Smith White/Euro RSCG, Salt Lake City, Utah; Fallon McElligott, Minneapolis; and BBDO Worldwide and SiteSpecific, both New York, said Flycast President-CEO Rick Thompson.

Content sites see the Flycast system as a cheap, virtual sales force.

"It's going to allow some [advertisers] to try out CD-Now," said Dave Brown, new business development sales director for the online music retailer, which will let Flycast sell about 500,000 impressions per month.

CD-Now normally sells ads for 3 cents to 5 cents per impression but will offer its Flycast inventory for only 2 cents per impression, Mr. Brown said.

PC World Online, Car-Smart, Hollywood Exchange and LoveSearch.com also plan to test the service, said Mr. Thompson.

Analysts believe a system to sell off extra ad space could be attractive for publishers.

"There's a lot of excess inventory out there now that's going to existing advertisers who end up getting overserved," said Bill Doyle, analyst with Forrester Research.

IMPLICATIONS OF EDI

For marketers and agencies, the concept of virtual media buying has major implications both on and off the Web.

Leo Burnett USA, Chicago, for example, is testing an electronic data interchange system to coordinate cable TV buys. It's easy to see how an EDI system that works on the Web could be expanded to other media.

But getting the systems to work accurately and quickly could be the biggest challenge for Flycast and Narrowline.

Flycast, for example, promises to match up an ad with a user one at a time, a process that demands an efficient and sophisticated back- end system, Mr. Doyle said.

Flycast said it will take a 20% cut of revenue from each transaction; Narrowline

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