The networks' argument against the exchange goes like this. Auctions work great for commodities: things like cattle, Pez dispensers, or maybe a keyword or two. But traditional networks, the networks argue, don't deal in commodities. They deal in custom-tailored ad packages, putting together a unique cluster of ad spots, product placements and the like for each and every advertiser. And since you can't auction a custom-tailored product, you can't auction a traditional network buy.
Last week, I pointed out that there's a difference between a wholly customized product and a Chinese menu. Media packages are the latter; and anyone who's seen a search campaign can tell you that you most definitely can auction off the individual ad units that make up a Chinese menu. If you can auction hundreds of thousands of keywords to make a search campaign, you can auction off any other kind of grouping of ad units in the same way.
This week, let's assume, for the moment, that traditional network packages are completely non-auctionable. I'd like to use that premise to point to the far deeper flaw in the networks' point of view: given their logic, the networks are much better off being wrong than they are being right.
Remember that it's the most-valued advertisers--a blue-chip group including the likes of Wal-Mart, Toyota and HP--that want the e-Media Exchange to go forward. They're the ones who see an ad-buy exchange as the best solution to perceived network accountability problems. In response to that need, the networks have gone much further than saying that they won't go along; they've said that they can't go along, because an inability to participate in auctions is part of the networks' business model.
Now also keep in mind that the drive for advertising accountability didn't develop from nowhere. It grew out of experience with other, highly accountable channels--like search, other forms of online marketing, and direct mail. And so lingering in the back of advertisers' minds is the knowledge that, if traditional networks won't deliver on accountability, there are plenty of other channels that will. And if the traditional networks aren't capable of delivering that accountability, then advertisers will give up on trying to change the networks' mind on the Exchange (something which, according to the networks' viewpoint, they can't do)--and they'll start seeking out alternatives instead. If I were in traditional network sales, that would worry me.
Maybe the networks see the situation differently. Perhaps they feel secure in the position that everybody still needs to be in TV and magazines, no matter how they're buying, because TV and magazines are where the eyeballs are. And there's certainly a realistic basis for that sense of security: I, for one, don't see Toyota halting all television spots anytime soon.
But while I can't see a near-future in which Toyota halts TV spots, I can see a future in which Toyota spends much less on TV than it has up until now. Search, display ads, e-mail, and viral branding along the likes of Burger King's Subservient Chicken could do an awful lot of the job that's been reserved, until recently, for TV and magazines--with a far higher degree of accountability. And as accountability becomes increasingly important to advertisers--as CMOs starts to work still more closely with CFOs--that kind of spend migration will become only more attractive.
Indeed, that kind of spend migration is happening already. I've personally witnessed a major client or two shift ad spend from traditional venues into expanded search; I'm sure that parallel new-media CEOs have seen the same kind of thing, and that traditional networks have begun to feel it.
That's exactly why the networks really don't want to be right when they say that, due to the nature of their business, they'll never be able to sell ads through an auction. By making that kind of admission, they're bound to drive advertiser spend away.
But in the end, the networks really don't have so much to worry about. Because, as I pointed out last week, their argument is wrong--fortunately for them.