• by David Cotriss , June 18, 2002

With H.J. Heinz’s multimillion-dollar leap into online buying, will these marketplaces finally achieve liftoff? Ad exchanges, also called media marketplaces—you’ve probably heard of them by now. A growing number of services, at least two dozen already, are being pitched as tools to remove the “middleman” and simplify media buying and trafficking, saving valuable time and perhaps money, all in a “one-stop shop” format. However, many in the industry question whether these online tools are truly helpful or if they just disrupt established procedures. It is a question that deserves a closer look.

The buzz started with AdAuction.com, now called OneMediaPlace, the first such service to gain significant attention. The fact that the service originally used an auction format is only part of why users have hesitated to adopt it and similar services. Two other leading media marketplaces are AdOutlet.com and AdExchange.com. AdOutlet claims to allow for the “aggregation, presentation, and transaction of inventory across all media types.” AdExchange sets itself apart by eliminating RFPs and enabling one-click insertion orders. Some of these marketplaces appeared to be catching on. OneMediaPlace alone is purported to have 14,000 registrants in its database. However, online media buying got a surprise last month when H.J. Heinz conducted a multimillion dollar cable TV buy for Q1 2001 using FreeMarkets, a site that deals with tangible commodities like eggs and fish rather than being specifically geared towards media buying and selling.

This had TV networks—which have resisted selling inventory through online marketplaces since they could reduce media prices—in a tizzy.This marked the first publicized instance that an online marketplace was used by a major U.S. advertiser to buy offline media, and the first reverse auction for TV advertising. The fact that it wasn’t a media marketplace may reflect on the challenges they face. Over 20 bids were made during the half-hour auction.

(Possibly casting further doubt about the viability of online media marketplaces, OneMediaPlace laid off a third of its employees late last month.)

A report issued by Jupiter MediaMetrix on October 4, 2000 echoes the challenges media marketplaces face. According to the report by lead analyst Christopher Todd, a recent Jupiter Executive Survey found 83 percent of respondents had not used a media exchange to purchase interactive inventory, and that 66 percent said they were either unaware or unconvinced that online media marketplaces offer any benefits. The basic message to advertisers is that they should look to these marketplaces for remnant inventory and as tools to improve workflow efficiencies.

The auction format appears to be receiving the most criticism. According to Jupiter’s Christopher Todd, “the auction format for buying and selling media online is not feasible. Publishers don’t want their inventory to become a commodity. And buyers and planners can’t create a media plan for auction buys due to the uncertainty involved.”

Michael Leggs, Interactive Media Planner for TMP Worldwide, argues that media auctions can also jeopardize the client-agency relationship. “With an auction, if you don’t place the winning bid, you will disappoint your client and have to start over,” Leggs says. “That’s not to say they can’t work well if clients use them on their own.” LeAnne Rozner, Media Buying Supervisor for Exile on Seventh, a leading interactive ad agency based in San Francisco, CA, adds “auctions don’t work well since they have to coincide timewise with your needs, adding great uncertainty to the process.” With these barriers, media auctions face challenges despite the possibility of a buyer getting a lower price. Beyond auctions, the idea of buying media through online marketplaces in general faces an uphill battle.

Focusing on specific functions while leaving other aspects of the process to the buyer seems to be the direction these marketplaces are taking. “Media marketplaces won’t be able to be one-stop shops,” says Jupiter’s Todd, “but they can improve certain aspects of workflow.” Part of the reason is that these services often don’t offer all available media. Planning needs to be more global and cover all possible media. Other resources are still needed to be able to plan a campaign via the marketplaces.

Leggs, who has looked at AdAuction and used AdOutlet, says the sites are good for conducting searches based on factors such as demographics, but that “the agency media planners will always use additional tools for a total buy.” AdExchange will soon release what they deem a “complete solution” for buying and selling media, from availability inquiry to negotiation, but negotiations will still need to be done by phone. The new service will include planning forms, the automation of insertion orders, and invoicing. Other firms, such as DoubleClick and Spark Online, are developing similar tools that aim to be true “one-stop shops,” and only time will tell whether they can live up to their claims.

The human element is an important one that these marketplaces overlook. “There’s a move in the industry to remove buyers and planners,” says Leggs. “Buying media is based on relationships with media reps. If you have a good relationship with a rep, he or she will come to you first with a great buy you’d never find otherwise. That’s the best way to get great deals.” He points out the importance of relationships if e-mail is the only contact method used, reps may not respond since they don’t know you.

Although personal relationships are important, media marketplaces are certainly hoping that they can offer competitive prices in a more automated way. “Pricing can be better than the rate card, but you can likely get better prices through reps since they take into account all factors in setting prices, personal or otherwise,” says Todd. “Agencies want to be sure they get the best prices, and these marketplaces need to be able to adapt to agency needs.” He says this is compelling many agencies to build their own customized marketplace tools.

Media marketplaces appear to work best for remnant inventory. There aren’t enough media options for important, key buys. So they can work well for remnant buys or for running tests at possible low cost. As Leggs puts it, “when putting together a media plan, you want premium placement. You need to know exactly where an ad will be placed. The general connotation with marketplaces is for remnant space.”

There’s an additional drawback to media marketplaces. “For OneMediaPlace, you need to use a credit card up front or fill out a credit application, adding an extra step,” explains Rozner. “It doesn’t really fit in with our business methods.” She says she does like the setup on the web, but would like functions tailored to her specific needs. There does seem to be a market for customized versions of existing media marketplaces. Whether that will happen remains to be seen. “Online media marketplaces are a great concept, but it’s more theory than reality,” says Leggs. “They’re like the ‘fish sticks’ of the ad industry versus a salmon fillet,” he adds with a laugh. Many will be watching for improved marketplaces that address the criticisms. Indeed, new avenues are being explored. US Marketer (www.usmarketer.com) is the first media marketplace to include promotional items such as shirts in addition to advertising time and space.

“It will be interesting to see what new tools evolve with wireless and other emerging technologies,” says Jupiter’s Todd, adding that the need for media marketplace inclusion of wireless technology is still 2-3 years away. Whatever the future holds, it doesn’t appear that the media buying and planning industry will face a dramatic change anytime soon.

Freelance writer David Cotriss can be reached at dcotriss@earthlink.net.

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