• by December 6, 2000

By Debbi K. Swanson

Following last week's article, Paul Grand, president and CEO of the now defunct AdExchange.com, took a few moments from transporting boxes from the offices to his home, to talk with MDN about the demise of his company. As we reported last week, AdExchange.com died after a very brief life - it launched just this June and was gone by November. Some, such as Carl Bryant of Mediapassage.com, said the company was never in business at all. Grand disagreed.

"We were definitely in business," he says. "We had moved out of the beta test, had customers including 25 of the top planning agencies and the 30 sites that were on the test were in the top 100. But two factors worked against us.

"First, timing. We were launching at a time when everyone in the Internet ad market was feeling intense pressure. We believed what buyers wanted was robust inventory, not remnant space. At least they wanted stuff that wasn't sold, across all types of inventory. But the infrastructure on the sellers' side wasn't sufficient enough to satisfy.

"We knew there was a lot of work in integrating systems [so clients could use our software platform], and we were charging a fee to do that. Two months ago people were willing to pay, now they're not. So the second problem was we ran out of budget. It happened across the market, with staff cuts mostly the result of the Nasdaq plunge. And when that happened we didn't have enough sites up to give us the critical mass. Having thousands of registered buyers doesn't mean anything. You need buyers with the money ready to buy. And you have to have the inventory to buy."

Grand said they looked at various ways to adapt to stay in business. "We thought we could kill the integration fees, but there was so much work to integrate we couldn't afford that. Then we thought we'll let people post inventory, but that's mostly remnant inventory and we didn't want to go in that direction. The stock market pressure was handcuffing everybody. It all came down to financing. Changing direction required additional funding which wasn't available. Our investors and board said that given the state of the market and financial needs of the company, better to shut down and give the market some time."

AdExchange's other problem was that it focused only on online media, not traditional media. Grand agrees with many others who say that having one interface for the entire industry is needed.

David Smith of Mediasmithinc.com says that the online exchange is "another example of a tower of Babel. There are too many of them. The reason SRDS is so powerful as a bible for rates for traditional media is because there's only one of them. In order for the exchange area to survive, it must develop overriding technology with one interface. I know I'm not going to search 30 exchanges to find the best deal in TV in Detroit, I'm going to call the rep."

To Smith, reps are the equivalent of exchanges. "We know how to negotiate with them