Marrying old-media ads with Internet selling

The business of buying and selling radio, television and print advertising is about to change as Google and eBay make moves to bring the efficiencies of online transactions to an old-school media industry.

Google is using its hugely successful online ad system to let its advertisers target ads to run in newspapers and over the radio in specific markets. Meanwhile, auction site eBay is building a pilot online exchange for the buying and selling of cable TV ad time.

The hopes are that more advertisers will have access to the traditional ad markets, media outlets will boost their ad profits, and Web-based technology will streamline a business where faxes, FedEx packages and phone calls still predominate.

One thing they all have in common is they have figured out how to use the Internet to manage the supply chain of unsold inventory at the local level.

--Mike Boggs,
national sales director,
Rainmakers International

Most primetime ad space--known as inventory in industry parlance--is sold months in advance. However, television and radio stations are often left with unsold inventory that Google and other Web-based systems allow the stations to sell at the last minute.

"One thing they all have in common is they have figured out how to use the Internet to manage the supply chain of unsold inventory at the local level," said Mike Boggs, national sales director at Rainmakers International, an ad agency that serves national and local radio and television markets.

"Three years ago, a guy like me wouldn't have been able to sell unsold inventory at the local level because we would have had to call every station," he said. "Now, we can buy inventory at the last minute in specific cities and do it efficiently."

Enabling online ad buying for traditional advertising like print and radio over Web-based exchanges and networks will not only offer a way for media outlets to get rid of unsold inventory but also bring prices down to affordable levels for smaller companies that have been priced out of the market, experts said.

"Everything Google stands for is just monetizing inventory, whether it's online or the audio side," Boggs said. "My hope is they'll be able to do the same thing on the local TV side, particularly cable. It's a tough market for us to penetrate and it's overpriced. Buying CNN at the local level isn't affordable."

Google tests the waters
As usual, Google is making the biggest waves in the industry. The search giant has tested the waters with trial sales of ads in magazines and announced plans in November to run a test involving more than 100 advertisers and more than 60 newspapers.

The company last year began testing Google Audio Ads, its automated advertising system for radio. Now working with 700 stations in 200 metro markets and an unspecified number of advertisers, the service integrates technology from Google's acquisition of radio ad company dMarc Broadcasting.

Google is in talks with CBS on a deal that could see it selling ads to run on CBS-owned radio stations and distributing CBS content, a Merrill Lynch research report said last week. Google has declined to comment on the report.

Google also is eyeballing outdoor display and billboard advertising, according to a research report Bear Stearns analyst Robert Peck issued on Tuesday that links to a recent patent filing by Google. Asked about that filing, a Google spokesman said: "We file patent applications on a variety of ideas that our employees come up with. Some of those ideas later mature into real products or services, some don't. Prospective product announcements should not necessarily be inferred from our patent applications."

Industry insiders expect Google to move into the television market. And why not?

"We've got an efficient marketplace, hundreds of thousands of advertisers who are all looking for additional reach that is cost-effective," said Richard Holden, a director of product management for Google's advertising business. "The philosophy in terms of our large marketplace of advertisers, the efficiency and our toolset can be extended to a lot of different ad markets."

Google provides a bridge for small and medium-size businesses that have never advertised beyond the Internet to reach publishers and broadcasters whose sales teams are typically devoted to the big ad budgets of the biggest brands.

Job ads in Utah
Domain name provider Register.com ran ads in Utah's The Deseret Morning News and The Salt Lake Tribune as part of Google's newspaper test, said Craig Cooperman, director of acquisition marketing at Register.com. The ads targeted job seekers and included phone numbers and Web addresses that enabled Register.com to track how well the ads performed, he said.

Google offers the flexibility for advertisers to shift ad campaigns to new markets and to move them within different sections of the newspapers, as well as manage the newspaper ad campaign in conjunction with its search ad campaigns, Cooperman said.

The Register.com newspaper ads were purchased with the help of search marketer Did-It, which also is helping customers buy radio ads through Google. "Google provided significant price discounts, which made it a no-brainer," Did-It Chief Executive Bill Wise said of his firm's participation in the Google Audio test. In addition to offering discounts to advertisers, Wise said he suspects Google is offering stations revenue guarantees as a way to grow its radio ad network, much like it did to create its online search ad network.

Not everyone welcomes Google's entrance in the offline ad market. Many advertising agencies and some media companies are worried that Google will end up dominating the industry and controlling prices, like it dominates the search engine advertising market.

However, Google "doesn't want to create any anxiety," Holden said. "We view ourselves as complementary to what publishers are doing as a whole, and agencies and ad buyers. We're channel agnostic."

The eBay way
Apparently, advertisers are not as worried about eBay. A group spearheaded by Microsoft, Hewlett-Packard, Intel, Home Depot, Toyota Motor and some ad agencies, including Carat Group, chose eBay over Google when seeking a technology partner to create an online marketplace targeting cable TV stations, said Patty Kerr, a spokeswoman for the group.

eBay is on track to implement the eMedia Exchange pilot in the second quarter, she said. The exchange, which will allow cable stations to confidentially bid on advertising over the Internet, is not designed to be a replacement for traditional media buying, she said.

The networks won't play along for the foreseeable future. They want to maintain control over their inventory.

--Gene DeWitt,
president,
DeWitt Media Strategies

Yahoo, meanwhile, has no immediate plans to leverage its online ad network for the sale of offline advertising. Under a partnership with nine newspaper publishers representing more than 225 newspapers in the U.S., Yahoo will power the ad networks for the papers, as well as power their search and map functions, said Eric van Miltenburg, general manager of Yahoo's newspaper consortium. "The deal does not contemplate Yahoo being the ad network for their print ads," he said. Although, "there is nothing that would preclude us from moving in that direction."

Google faces challenges in the offline world that it didn't face in the online world, particularly when it comes to broadcast. Many station managers won't want to cede any control over their pricing or scheduling, entrenched sales representatives will be protective of their turf, and some ad agencies will see an online marketplace as a threat to their existence, experts said.

"The networks won't play along for the foreseeable future. They want to maintain control over their inventory," said Gene DeWitt, president of media buyer and consultancy DeWitt Media Strategies. "I can't imagine TV networks turning inventory over to this commoditized process before three to five years."

Google's biggest hurdle is cultural, said Did-It's Wise. "Publishers are used to reserving inventory and giving discounts," he said. "Madison Avenue needs to evolve."

However, agencies shouldn't worry about being sidelined, said Greg Sterling, principal analyst at Sterling Market Intelligence. "That won't happen because of the need for creative (skills to create the ads) and because you need sophistication and human expertise to really execute an effective campaign," he said.

Several other companies are using Web-based technologies to enable the buying and selling of radio and TV ads. Softwave Media Exchange is a platform for buying ads on radio and television stations. The company works with more than 1,600 radio stations in the top U.S. markets and all the major cable networks covering 50 of 200 cable markets.

Bid4Spots runs a reverse auction every week in which advertisers set their maximum prices for time slots and radio stations bid on them. The company has 2,300 stations in the largest U.S. markets, said Chief Executive Dave Newmark. At the end of January, Bid4Spots will also enable advertisers to buy ad time on Internet podcasts.

Meanwhile, Spot Runner is an ad agency that offers an online system for buying television ads and a low-cost way to create custom advertisements using templates from its library of ad samples. Where a traditional 30-second spot costs close to $400,000 on average, Spot Runner helps create ads for less than $500. The company's investors include ad agency holding companies WPP and Interpublic Group and media players CBS and Lachlan Murdoch.

Despite the resistance old-world media has to the new Internet players, resistance is futile, said Boggs of Rainmakers International, whose customers have bought advertisements via Google, Software Media Exchange and Bid4Spots.

"Our thought process is it's capitalism and survival of the fittest, at the end of the day," he said. "Whatever is good for the client and for the medium, whatever helps to sell more radio ads, is probably good for the industry."