• by March 12, 2001

By Debbi K. Swanson

Heinz recently conducted its second online reverse cable media auction, this one for Mr. Yoshida's Fine Sauces. While the buzz was that their first auction, for Bagel Bites, was a bust, the players are declaring this one a success. According to Jason Reneau of the auction company, FreeMarkets, the event certainly was.

"What we're doing is using technology to make the traditional media process more efficient. We're doing the normal things that are done in a media buy, i.e. making a proposal and negotiating, but we've focused on using technology to make the process more open and transparent."

By that Reneau means that suppliers (media outlets) see the bidding activity, are confidential from each other, and see exactly where they stand in relation to our bidders. "In traditional negotiations, people are on the phone with each other, each transaction is different, and the process takes time. Here, a supplier can bid and see in black and white and real time whether they're the best buyer or not."

Myers Reports reported four suppliers participated in this bid. And Joe Mandese, editor of Myers Reports, said he participated as a surrogate bidder.

"I saw the entire thing from the FreeMarkets Command Center. What impressed me was how quick the process was -- 18 bids in just over 32 minutes. Think about how long in traditional method getting 18 bids from four suppliers would take. The meetings with all four, getting the initial bid, then rebidding, etc. Eighteen interactions could take days or weeks. I think this kind of auction works great for private markets like Ford and Coca-Cola. Public exchanges don't work for TV, though they do work for online and other media."

And, Mandese says there's no substance to the charge that media auctions commoditize media. "They don't intend to handle all media this way, just the media that is already commoditized."

The concept has actually gotten a lot of publicity since the first auction last October. You could say that in the process of selling media, this concept has also made media. What's also interesting is that FreeMarkets isn't an ad agency of any kind.

Reneau, who's been with FreeMarkets since May 1996, (he's employee number 17), has done a lot of first-time bids. "Our real focus is about how to create a specific custom online market and drive efficiency. We've bid in honey, glycerin, printed circuit boards, etc. In each situation someone is making a call about who to buy from and at what price. We look at the real world process and determine how to structure an auction market to reflect that process.

"We actually never used the word auction because it isn't all about price," adds Reneau. "We called them competitive bidding events. However, when we did our IPO we made a decision that what we do is complicated enough for people to understand, so we'll go ahead and use the word auction.

"Media is interesting to us. There's a lot of potential for efficie