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Auction Marketplace CAN Work for Media

Dave Newmark
Auction Marketplace CAN Work for Media Dave Newmark

In his column titled Media Maze: An eBay Model for Media?, iMedia's media strategies editor Jim Meskauskas offers plenty of reasons why he believes an auction marketplace can't always work for media. Since I am the president of a company offering an auction marketplace for media, you might assume I'm here to offer a rebuttal. Quite to the contrary, I agree with Jim-- the auction model is not for everyone.  

But to advance the debate a bit further, I'd like to offer the exception that proves the rule: remnant (last-minute, unsold) airtime. And the twist: a reverse auction model.  

I'll use radio airtime as an example, since it's what I know best. There is vast unrealized revenue potential -- for advertisers and stations alike -- in traditional radio advertising. Airtime that goes unsold obviously doesn't bring in any money for the stations. And many advertisers miss out on radio's potential because they can't afford premium rates, don't want long-term contracts or they don't have the resources to negotiate with multiple stations at once. 

As Jim astutely points out, whether or not the auction model will work for a particular product largely depends on a wide margin between that product's material value and its perceived value. Remnant radio airtime's material value is zero if it remains unsold-- it's a perishable product. Meanwhile, there are advertisers who otherwise can't break into radio who perceive that airtime to be valuable enough that they would be willing to forego the selection of specific stations and advance planning, in return for much lower ad rates.     

Reverse auctions drive prices down

Now that we've gotten specific about the medium, what about the model? Several companies -- AdAuction among them -- experimented with the traditional auction approach only to fail because the model itself didn't meet the needs of the participants. Radio stations are justifiably nervous about their bargain remnant rates becoming public -- and what that might do to their negotiating power when it comes time to sign long-term advertising contracts -- while advertisers are not motivated to participate in an auction that bids their prices up. 

A reverse auction turns the traditional approach on its ear, allowing stations to compete for advertiser dollars. Where a standard auction invites the buyers to do the bidding and the highest price wins, in a reverse auction, the sellers do the bidding and the lowest price wins. In the case of remnant radio, advertisers are the buyers and radio stations are the sellers. 

Jim's cautions against the "susceptibility to the irrational exuberance and hysterical whimsy of human passions" and the "illogical attribution of value" are spot on-- which is why the reverse auction works so well. It keeps prices from being driven into the sky, as he warns, and instead tests the market in terms of how low the stations are willing to go. 

These are the starting points for a potentially successfully auction marketplace. But merely slapping the reverse auction model onto any remnant airtime still is not good enough. As we researched how to design Bid4Spots, our online marketplace for remnant radio airtime, and what would make it an auction that radio stations and advertisers actually would use and value, we found a few deal-breakers for each side. Here are the factors that the unsuccessful companies did not take into account:

  1. There is a "perfect moment." Obviously, radio stations would prefer to sell their inventory in advance through the normal sales process. But there's always unsold airtime. By Thursday morning prior to the broadcast week, that unsold inventory is truly un-sellable-- it's too late for most advertisers to purchase the standard way. Rather than lose out on revenues, stations often are willing to cut their losses and sell it at the last minute at a discount. This is the magic moment, and it's when the auction must take place: close enough to the next broadcast week that a station manager knows for sure that he cannot sell the inventory through the regular sales channels, yet far enough away to put the spots through the traffic department. 

  2. Radio stations want their remnant rates to remain confidential. This may seem to fly in the face of the democratic notion that auctions must offer full disclosure. But the equalizing factor here is CPM-- cost per thousand listeners. Advertisers declare a CPM ceiling up front; radio stations bid against each other to see which one will match a particular advertiser's rate. The winning rate remains confidential, safely cloaked behind the system's ranking index. 

  3. Advertisers want more control. With typical remnant solutions, advertisers are only allowed to select the market-- no other demographics are under their control. Their spots are sold on a wide rotator basis and run at the station's discretion, they can be pre-empted, and advertisers don't know which stations ran their spots. To gain advertiser support, it's essential -- and, yes, possible -- to design a system that allows them to specify demographics, market/format, day and day part, budget and maximum allowable CPM. 

Clearly there's no one-size-fits-all auction marketplace approach for all media. The internet certainly provides us with tools to simplify the processes across multiple channels like never before. But that doesn't discount the fact that every medium and its participants have unique needs that must be accounted for if any new solution is to be accepted and successful.   

So the question needs to evolve from, "Will an auction marketplace work for media?" to "Can we adapt the auction model to work for this particular medium?" We've seen it succeed in radio-- with some 1,300 radio stations and several hundred advertisers participating in our reverse auctions each week. And I'm willing to bet that similar, tailored methods can successfully be applied to any unsold airtime, anywhere.  

Dave Newmark is president and CEO of Bid4Spots, an online marketplace for unsold radio ad inventory; and is owner, president and CEO of Newmark Advertising, considered by both direct response and brand advertisers to be the leading agency for endorsement radio. He has been innovating in the radio advertising business for more than 26 years, making him uniquely qualified to design a system that makes radio advertising work well for advertisers, while helping stations capitalize on their inventory.

iMedia: I read that Randy Falco wrote in a memo to the AOL staff: "The easiest thing and the best thing you can do for advertisers and agencies today is make life easy for them. And Platform-A lets us do that. It'll give them the most extensive reach of any advertising network on the web. It'll give them in-depth analytics. It'll give them superior targeting. It'll give them great information about their customers. And ultimately, which is what everybody wants, it'll give them a solid ROI."

That's a lot of promises to advertisers. Can Platform-A really deliver?

Viebranz: If we close out 2008 having demonstrated to agencies and advertisers that we have the full range of assets to help them solve their problems, and that we can make it happen, I'll feel like we were successful. One size does not fit all, and so our objective is to listen a lot and to bring unique solutions that combine reach, frequency, targeting and insight to help meet specific marketing challenges. We are already seeing some tangible evidence of the combination of these assets, and there will be a lot more to come.

And let's not forget the publishers. We are expanding Tacoda's "people not pages" mantra to all of Platform-A, and we are already demonstrating to publishers that we can drive far higher eCPMs as well as large-volume inventory monetization. This sets us apart from everyone else.

iMedia: Your competitors -- Yahoo, Microsoft, Google -- are making similar moves with similar buys. What sets AOL and Platform-A apart, and why should advertisers choose Platform-A?

Viebranz: We combine the broadest reach on the internet. For advertisers, our O&O sites, combined with our third-party networks, reach more than 91 percent of domestic online users, which is more than Yahoo, Google or MSN. In addition, with the acquisition of Tacoda and Quigo, we have some of the best targeting tools on the internet. We can deliver ads across platforms. That's a powerful combination.

Publishers get better monetization combined with significant insights gleaned from their data.

iMedia: Is it fair to say that AOL lagged beyond the others on the advertising front for quite a while? Do you think the companies it has acquired, and the new structure, gives the company equal footing, or even an advantage? How and why?

Viebranz: While it's true that our roots were in access and not advertising, I'm not sure I entirely agree with your premise. For example, AOL saw the trend toward advertising networks back in 2004, when we acquired Advertising.com, which now has the world's largest third-party display network and is in many ways the envy of the business.

Over the last year, we have added to our portfolio with several more smart and economical acquisitions. As I said earlier, we now have an unmatched advertising network: the biggest reach, the best tools and a superb sales force.

I like to think my background gives us a leg up. After 17 great years in Time Warner, I was fortunate to play a part in building Tacoda, which we then sold to AOL. So I have a good idea of how to navigate a large organization while still working relentlessly to maintain and grow the entrepreneurial zeal that needs to pervade Platform-A.

iMedia: The latest realignment has been combining the AOL and Tacoda sales teams into Platform-A Marketing Solutions. What does this move add to the mix?

Viebranz: Platform-A Marketing Solutions will provide large brand customers with coordinated access to the full Platform-A product suite, including the offerings of AOL, Tacoda and Advertising.com.

Our first priority for this year is to drive more money from the largest advertisers, including some that have not traditionally spent a great deal with Platform-A. As more and more brand spending moves from traditional media to online, we simply have to be positioned to garner a significant share of that spend. By creating Platform-A Marketing Solutions, we can develop deep and enduring relationships with these top accounts -- leveraging all of the considerable assets that we can bring to bear -- and demonstrate our ability to work with our agencies and advertisers to help meet their marketing challenges.

iMedia: On a personal note, as you mentioned, before your Tacoda days, you worked for Time Warner. What's it like to be back in the empire?

Viebranz: When I left Time Warner 10 years ago it was with the intention of playing a part in building something. Doing the Tacoda thing with Dave Morgan was the most fun I've had in my business career. At the same time, as I was exiting HBO, I told my then-boss Jeff Bewkes that if I wanted to be in a big media company, Time Warner was the only place to be. I never would have imagined that things would go full circle and I would end up back in the fold. There are a lot of things within AOL and Platform-A that I am trying to turn on a dime. No small feat but after 10 years away, I think I have more patience about the stuff that doesn't matter and less about the stuff that does. All-in-all, this is a great place, and no one has the breadth and scale of the assets that we do.

iMedia: What does the year ahead look like for you and for Platform-A/AOL?

Viebranz: We're very excited about 2008. We have a powerful advertising network in place, and it will only get better as we fully integrate our recent acquisitions and expand our network internationally. I really believe that AOL is positioned best to take full advantage of the ongoing shift of display ad dollars from traditional media to online.

Choose the crowd or let the crowd choose you?
While you certainly need a crowd to crowd-ource, you may not need the biggest crowd imaginable. In fact, sometimes it's best if you go with a small, highly selective crowd.

According to Peter LaMotte, president of GeniusRocket, a brand has two options for gathering a crowd, and the right one depends on the goals of the campaign.

"If you're looking for a contest where anyone can enter, regardless of skill, use the contest itself as your marketing tool," LaMotte explains. "If you want to source high quality creative assets, use a community that has either been vetted or recruited based on the creative skill you want."

In other words, you'll need to take a close look at the platform you're using and ask, "Does it invite anyone and his brother, or is it leveraging a much smaller community of highly talented creatives who have the skills we're looking for?" Both approaches will get you crowdsourced creative, but only one is going to be right for your brand and goals.

It may be hard for people who work in advertising to wrap their head around the idea that someone with talent would work for free, or -- at most -- the possibility of a small financial reward that is most likely well below their market rate. Yet, people do it all the time.

"So, what motivates the crowd to pick up the challenge and create something wonderful for a brand?" Actually, that's a bad question. Crowds can't be motivated. Individual people are motivated. And here you have a few options right off the bat.

First, you can use a single carrot approach. This means picking one motivating factor and sticking with it. The advantage is that it's simple and rather straightforward. But the downside is that you're going to get a bunch of people with basically the same motivation. (Well, maybe that's a good thing, depending on what you're after). A second option, then, is to use a variety of carrots. Think money and fame. Or, free product and great notes on the creative submitted. The point is, by combining rewards, you're diversifying your talent pool. The person who does it for the money is likely to produce a very different kind of creative from the person who does it for bragging rights or fame.

Regardless of what your motivation is, you need to take a hard look at the core call to action, according to DJ O'Neil, founder of Hub Strategy.

"Don't even think about crowdsourcing unless there is potential for good work," says O'Neil. "If you need to produce some bland, shoddy tri-fold brochure for an ambulance chasing lawyer, guess what? There will be no "crowd" to "source" because no one will be interested. For creative people, crowdsourcing isn't just about the possibility of making money. It's also about the possibility of doing a great piece of work."

In other words, no matter what reward you choose to offer, you need to look at the campaign and ask if it inspires. If it doesn't have a cool factor, if it doesn't get the creative juices flowing, it'll likely go over like a lead balloon.

"But seriously, what do we pay these people?"
Unfortunately, there's no easy answer if you're looking to determine how much to offer for a reward. However, there are a few schools of thought worth considering:

For LaMotte, effective crowdsourcing comes down to being able to offer at least two -- but hopefully all three -- of the following things to the crowd:

  • Brand identity. A well-known brand is likely to inspire a larger -- and hopefully more passionate -- crowd.

  • The right reward. No matter what the reward is, it must be commensurate with the amount of work being asked of the crowd.

  • Time. Creating something great doesn't happen overnight. And creators typically have day jobs, so the more lenient you can be in terms of a submission period, the better.

Of course, there's another way to think about motivation. Consider the value-based approach. Here, you'll want to choose a reward that matches the value you place on the product. But according to Ross Kimbarovsky, co-founder of crowdSpring, you don't necessarily need to offer a cash reward to get your crowd to understand how much you value their work.

"The value you give your project will generally be reflected in the quality and number of entries," says Kimbarovsky. That value can come in the form of cash, non-monetary reward, or even creative feedback.

As long as the brand places a value on the work they're asking for, Kimbarovsky believes they're likely to get great responses. But to increase the quality, Kimbarovsky advises that brands offer a reward in line with other contests. And of course, he says, "Adding a second and third award for runner-ups will encourage more work and will give you more choices."

Write the brief
As it turns out, the same rules that apply to working with a creative agency also govern crowdsourcing.

"Your crowdsourced [creative] will only be as good as the creative brief that outlines your assignment," says Neil Perry, president of Poptent. "Communicate key pieces of information such as the tone of the video and the parameters or boundaries of the brand, [and] don't let the creative community stray too far from the tenets of your brand persona."

According to Perry, a strong creative brief will produce strong submissions. But there are some differences to working with the crowd. Perry explains that if you treat crowdsourcing like UGC, you're going to get a lot of junk. In other words, if you run it like a contest, you're going to get amateurish results. On the other hand, if you approach the community as if they are professionals, you're going to get a number of strong submissions, so the brand should be prepared to buy multiple ideas. Along the same lines, the brand should try and give thoughtful feedback on submissions it doesn't buy. Under no circumstances should the brand ask for viral content.

"It's next to impossible to make a viral ad, and to predict virality," says Perry. "And remember, a few of the key components of successful viral ads are: risque activity, sexuality, humor, shock and surprise, suggestive behavior, violent activity, and outrageous behaviors. Is your brand willing to allow that to happen in one of your videos? If the answer is no, then don't ask for viral ads. Instead, tell the creative community that you want a fun, entertaining ad with some pass-along value and be satisfied that about one in a million videos gets a million views."

Michael Estrin is a freelance writer.

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