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Firm bids for ad auction market

An Internet start-up hopes to create a marketplace "auction" system for placing and pricing ads for specific consumers.

An Internet start-up today unveiled a system that it hopes will create an online marketplace for placing and pricing Internet ads to specific types of customers almost instantly.

Fledgling FlyCast Communications is testing its concept with several Web sites and ad agencies and expects to roll out the service next month.

Similar to efforts from other new companies, FlyCast seeks to create an "auction" system that tracks each click on an ad, letting advertisers use software agents to bid to show their banners to Web site visitors with demographic characteristics they desire most.

FlyCast uses the Internet's ability to collect information about a specific viewer's profile, then combines that with an advertiser's objectives and the context of a particular Web site to create a system for variable price matching.

"This is a new way of buying and selling and establishing market leadership," said Larry Braitman, vice president of marketing at FlyCast. "Right now the cost of sales are too high and the revenues are too low."

By using instant measurement techniques and FlyCast's AdAgent software to change advertising placement parameters on the fly, the company hopes to attract a piece of the fast-growing Internet advertising space. Forrester Research projects that Internet advertising spending will rise from $400 million this year to nearly $4.8 billion in the year 2000--still only a small percentage of total ad figures.

But FlyCast faces competition from at least two others eyeing click-based auction systems for selling ad banners. ADSmart, an affiliate of the Lycos search engine, this year launched a similar plan, and start-up Narrowline has been talking up its own system for months.

FlyCast also faces a challenge in lining up Web sites and advertisers behind a new model that differs from the ad industry's traditional methods of buying media, some analysts said.

"This captures our imagination, because the Net makes it more possible than elsewhere, but the fact remains that real-time markets don't really exist so far," said Bill Doyle, a Forrester analyst.

Doyle estimates that in 1996, Web sites with advertising as a whole sold only 15 percent of available inventory, a sign that there could be a tremendous market for a company to match advertisers with vacant spaces.

FlyCast aims not only for that unsold inventory, but also for banners on premium Web sites that sell out every month. Busy sites could designate a portion of their ad inventory for FlyCast's system, hoping the spot market would pay more than the publisher's standard rates.

To succeed, FlyCast may need to work with existing advertising ad networks, such as those run by Infoseek and DoubleClick, which has a system to track use of banner advertisements.

Senior Editor Tim Clark contributed to this report.

Copyright © 1997 Reuters Limited. All rights reserved.