Tech tool #4: Online ad collaboration

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The promise of b-to-b ad exchanges was this: An independent market maker would link buyers and sellers, saving money on both sides of the advertising equation. But despite a number of attempts over the last few years, none of these services has succeeded. Two exchange contenders, AdOutlet Inc. and OneMediaPlace (now MediaPassage), recently changed their business models to sell marketplace software rather than run marketplaces.

Now a new joint venture among the world’s three largest ad agency holding companies—WPP Group plc, Omnicom Group Inc. and Interpublic Group of Cos. Inc.—is taking up the fight, seeking a way to make all sides in media transactions more efficient.

Dubbed MediaPort, the venture, announced in April and scheduled to launch at a yet undetermined date, is headed by CEO Michael Lotito, former president of media agency Initiative Media, New York.

"We’re not trying to build a marketplace," he said. "The big glitz and blitz, trying to roll up thousands of buyers and properties to transact business purely on the Web, is over," he said.

Instead, Lotito said the venture will build a series of software interfaces, based on extensible markup language, enabling buyers and sellers to share the knowledge they need to conduct business electronically, then do that business without paper.

"The only difference between what [the ad industry] did in 1984 and today is we fax the letters" detailing prices and contracts, Lotito said, noting the current process is cumbersome and can be frustrating.

By contrast, MediaPort will allow buyer and seller to share a single, secure online workspace, where they can share details of inventory and pricing in real-time. "We imagine [buyers and sellers] will communicate via instant messaging or talk on the phone," Lotito said. "And, when they’ve agreed on a package and price, they’ll both hit an ‘approve’ button, which will automatically dump the information into their respective financial systems."

However, MediaPort will not require electronic access to sellers’ inventory systems. Rather, the seller can type this information in or create an automated link to the inventory system. "I don’t want to be in the inventory control business—that’s not my business," Lotito said.

MediaPort’s major revenue source will be user fees—charged to buyer and seller alike—for accessing the collaborative capabilities of the service. Details of those subscription fees are still being worked out, Lotito said.

Ad marketplaces defunct?

Carl Bryant, executive VP-technology and business development at MediaPassage, New York, which merged with OneMediaPlace in March, shares the belief that transactional ad marketplaces are defunct.

"The models failed where sellers posted inventory—print, broadcast or interactive—that hadn’t sold previously, and then expected a system would try to optimize this stuff and come up with a price," Bryant said.

Advertising exchanges may turn out to be just an artifact of the late-1990s dot-com mania. But new approaches to collaboration are promising. "I think [MediaPort has] the right idea," said Pete Stassi, senior VP-director of local broadcast at BBDO, which is owned by Omnicom Group.

Analysts say there were many inherent problems with the concept of an online ad exchange.

An online exchange "tends to commoditize products, and the sellers don’t like that," said John Fontanella, service director for b-to-b marketplaces at AMR Research Inc., Boston. "[Exchanges] don’t want to be seen as cheap ad space,’’ he said. "There are other aspects of buying and selling that have nothing to do with price. They have everything to do with quality and the right audience."

A sampling of buyers and sellers agree with Fontanella.

"A lot of systems in the last three to five years have tried unsuccessfully to automate all the human activity between the buying and selling of an ad," said Don Wahlig, director-marketing for e-business services at Interep Inc., a New York-based radio advertising rep firm.

"The reality is it requires a certain level of commoditization of the medium, and I’m not sure any of the media are ready to be commoditized," said Joe Ostrow, president-CEO of the Cable Television Advertising Bureau, which represents industry sellers.

Rather than exchanges for inventory, the big opportunity lies in redefining business processes, then connecting buyer and seller to eliminate time and paperwork, said MediaPassage’s Bryant.

If buyers and sellers are both automated, they can shave 40% off the cost of doing business, he said. "Everything from planning to payment is a cost that needs to be addressed."

No threat to the agency world

Lotito is also quick to dispel fears that the new company is a plot by "Big 3" agency holding companies to take over the agency world. The venture, based in Delaware, is a limited liability company with the three founding agencies owning a minority stake. These three agencies, which now own most of the joint venture, intend to sell additional stakes to others, reducing their collective ownership to a minority position, Lotito said.

"A good chunk [of the equity] is set aside for future deals with agencies, hardware and software providers, consultants—we haven’t decided what to do with it," he said.

Indeed, one ad exchange executive said the collaboration hub might help spur the adoption of online ad marketplaces in general.

"This creation of new industry consortia on the buy will accelerate this trend," said Alan Masarek, chairman-CEO of AdOutlet.

MediaPort’s first task will be to build a database of adXML tags, a set of standard XML tags for electronic forms that the industry has been trying to agree on for over a year.

"The people building adXML had full-time jobs and were doing this on the side," MediaPort’s Lotito said. "But when you go back to your office there are 8,000 things to do to pay your bills, and you don’t have time for an industry initiative. We’re building a company that will be 100% focused on this." The end result, he said, will be an interface between all systems chosen by media buyers and sellers.

But those solutions won’t emerge for some time, Lotito conceded. "We’re early in the process. This was germinating almost a year" and it will take another 18 months to develop products for license, he said.

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