Ad industry edging closer to electronic trading age

The American Association of Advertising Agencies plans to launch this spring the first piece of a national effort to enable electronic buying and selling of ads across media. The trade group gave an update on its eBiz for Media project during a session at its annual Media Conference and Tradeshow here on Wednesday.

Also at the show, eBay and partners showed off the Web-based advertising marketplace the online auction company is building and assured ad agencies it would not put them out of business by allowing buyers and sellers to negotiate directly.

Technology companies like eBay and Google are jumping into an industry that is ripe for modernization with its historical reliance on personal relationships and antiquated communications modes like fax and FedEx. Google reportedly has discussed selling ads on CBS-owned radio stations. The search giant also is selling radio ads to its AdWords customers, has sold ads in magazines in a limited test, and announced plans in November to run ads in newspapers.

The AAAA said it had chosen Arbinet, which has created exchanges for the telecommunications and music industries, to create a registry, or central database, for storing trading partner information. The registry will allow buyers, which includes marketers and the ad agencies that represent them, and sellers, which are the media companies that have ad space, to locate each other and communicate over the Internet. The parties can then either go through ad networks, online exchanges or auctions, or even traditional face-to-face meetings to conduct the transaction.

"We are one of the biggest industries that does not have (electronic trading) right now," Michael Donahue, executive vice president of member services at the AAAA, said in an interview before the session.

The eBiz for Media effort, first initiated in 2000, was waylaid by the media recession following the terror attacks of September 11, 2001, and has since met resistance from old-fashioned ad agencies reluctant to change their way of doing business. With new types of digital advertising formats emerging that can reach millions of consumers on the Internet, electronic trading is needed for the industry to be able to scale, Donahue said.

Separately, Arbinet also is designing an exchange for trading ads on mobile devices, said Robert Barbiere, chief operating officer of digital media at Arbinet.

"With all the new technology at our disposal these days, maybe every 30 years we should re-examine" the business of buying and selling ads, said Steve Grubbs, chief executive of PHD North America, a media services unit of ad agency Omnicom Group. The eBay marketplace is not a replacement for the current system, but an "adjunct," said Grubbs, who served as moderator of the eBay Media Marketplace panel. "We are not throwing out the relationship between the buyer and the seller."

The eBay Media Marketplace test is focused initially on the national cable television market. The eBay Media Marketplace Web site, where ad agencies, marketers and media companies can sign up to participate, went live on Wednesday, said Howard Rosenberg, director of private marketplaces at eBay. The marketplace is expected to go live and enable trading in a few weeks, he said. First, it needs a critical component--sellers.

While marketers like Lexus, Hewlett-Packard, Microsoft and Home Depot are participating, no cable networks have signed on yet. Under the system, buyers will be able to submit Web forms akin to requests for proposals specifying what dates they want to run ads, what their budget is, target demographics they seek in the audience and other information. They then invite networks to review their proposal. Sellers also will have the option to initiate auctions, following the eBay model, where they specify the ad space they have available to sell and choose the highest bidder, Rosenberg said.

eBay has already created similar private marketplaces for Hewlett-Packard, Sam's Club and the government of Mexico.

The panel audience wanted to know what ad agencies and broadcasters have to gain when the current ad-buying system seems to be working fine now. Electronic trading will make the process more efficient, reduce the number of errors and time wasted as a result of people having to communicate via telephone and fax and re-key information, provide an opportunity for increased business, and free up people to spend more time and resources on coming up with new ideas and improving the advertising creative, panelists said.

"The world is changing faster than we can keep up with it," said Ray Warren, president of ad agency Carat Media Group Americas. "It's a no-brainer to me."

"Phones will still work," said panelist Peggy Green, resident of broadcast and entertainment at ad agency Zenith Media USA. "It's just a way to communicate electronically."