Making Waves: Will 'Malibu' Give Spot Runner A Network Beach Front

Spot Runner, the company that harnessed the Internet to let small advertisers create commercials and plan and buy TV advertising time with the same scale and efficiency as national advertisers, is turning its sights on the national TV advertising marketplace. After months of quiet incubation, the start-up is ready to turn on a new system that will compete directly with services being developed by Microsoft, Google and the cable TV industry's Canoe Ventures, which all hope to make an exponentially fragmented TV advertising marketplace more manageable, more effective, and more lucrative for both buyers and sellers of TV advertising time.

Codenamed Project Malibu, the new system essentially is an online transactional platform that will enable TV networks - and ultimately, suppliers of online video - to automatically post their supply of advertising inventory for agencies to plan, buy and post via powerful, but easy-to-use tools and analytics.

Nick Grouf, the founder and CEO of Spot Runner, concedes that Spot Runner is coming late to the game, but says Malibu's open system is superior to Microsoft's Navic, Google's TV Ads, and Canoe Ventures, and ultimately will win favor in the marketplace by serving as a superior "interface" linking buyers and sellers, not an impediment.



During a briefing in Spot Runner's New York offices - a brownstone on East 48th Street in Manhattan - just blocks from where the Association of National Advertisers was hosting its annual TV advertising forum - Grouf and Spot Runner President-Media Platforms Mark Rosenthal, laid out a game plan for entering an increasingly crowded field that has so far produced a legacy of dead bodies.

The briefing, in fact, was held almost four years from the day that former Daimler Chrysler marketing czar Julie Roehm called for a "Nasdaq" like trading system for buying and selling TV advertising time during a keynote at the 2005 ANA forum. Roehm's call led to an ANA-backed initiative, and an RFP process that spawned an open TV trading system created by eBay, which ultimately failed because few if any TV suppliers would contribute enough inventory to attract advertisers and agencies to use it.

The failure of the eBay Media Marketplace, in fact, came years after an earlier wave of online media transactional systems flurried, then busted, during the dot-com crash of the late 1990s into the new millennium. Names like Media Passage, and, and even high-flying players like infamous energy markets maker Enron, all tried, failed, and burned through considerable capital only to prove that Madison Avenue was not ready to conduct business anywhere near as electronically or efficiently as Wall Street's famed trading systems.

But Grouf said the timing is right this time for several key reasons, especially the economy, which is forcing both buyers and sellers to rethink their inefficient processes, if only because they can no longer afford to manage them manually.

"In 1980, there were 18 million spots aired by national and locally," Grouf said, rattling off one of the most powerful stats in the Malibu presentation. "In 2009, there are 12.5 billion."

The exponential growth in the supply of TV advertising inventory will only grow more fragmented as the broadcast TV industry begins splitting its signals and increasing its supply via multicast digital broadcasts, and as the supply of online video becomes part of an integrated "video" advertising marketplace."

"There will literally be trillions of discrete spots," Grouf projected, claiming that the only way to efficiently manage the planning, buying, negotiating, and post-evaluation process will be to do it electronically, with sophisticated systems that can process, and make recommendations on the fly.

Grouf offered more stats to back up his point, estimating that a typical big TV advertising shop currently traffics "2 million" faxes per year, or "6,000 to 7,000" faxes per day to process its TV advertising buys. And all those faxes, paper invoices and post-buy transactional records all have to be "reconciled" by human beings, taking time and resources away from other things advertisers and agencies could be doing.

To illustrate this point, Grouf took MediaDailyNews through Malibu's sleek new interface, making a theoretical buy by Universal McCann TV chief Donna Wolf. In a matter of minutes, he said, she could request avails for TV spots delivering specific audiences, or even by using a keyword search function to highlight specific genres of programming, that might have taken agency buyers hours or even days to pull together. Then with a simple keystroke, Wolf could process the buy, and let Malibu handle the actual transaction electronically.

Group conceded that such a system undoubtedly would displace a number of agency executives from those roles, but said such displacement is inevitable, and that those executives would be redeployed into higher value functions like evaluating the best kinds of media that should be processed via systems like Malibu. On the sales side, he said, reps wouldn't have to spend time shuffling paper, but could make direct, personal sales calls focusing on reinforcing the value of their product with advertisers and agencies.

It's the kind of disintermediation that has been part of the impediment to accepting online transactional systems in the traditional media marketplace, even though they reign in online search and are becoming a bigger factor in online display advertising.

Recently, Google shut down both its print and its radio transactional systems, revealing yet another potential Achilles tendon for the online search giant as it tries to muscle its way into the trillion dollar traditional advertising marketplace.

But Google so far remains committed to its TV Ads initiative, and has been sinking vast resources in refining the system and in convincing advertisers and agencies that it is a better way to buy TV advertising time. It has won considerable favor among direct response shops, though big brand advertising agencies have mainly only dabbled in tests to find out how the system works. Likewise, most major TV networks have been loath to embrace the system, and Google TV Ads only national inventory comes from a few of NBC Universal's smaller digital cable networks, and the Hallmark Channel, though it also has access to the local inventory on EchoStar's DISH Network.

Another wild card in TV's new transactional marketplace is how quickly Canoe Ventures will be able to standardize and integrate the advertising and data across the multitude of cable TV households it represents, and how much it plans to be direct trading system for buying and selling that inventory, or how much it will work with other third-party developers like Google, Microsoft's Navic, Spot Runner, or others.

For his part, Spot Runner's Grouf said, Malibu will "sit on top" of Canoe and other systems, and will simply be an interface between any system that a buyer and seller use to process their TV advertising buys, including outside and internal systems.

The whole point of Malibu, he said, is to be open, efficient, and most importantly, easy to use.

Another key selling point of Malibu vs. Google and Navic, is that all transactions enables via Malibu will be completely transparent, meaning both buyers and sellers will get to see the final prices of what is bought and sold. A major concern big ad agencies have about Google TV Ads and Navic, is that they do not know what their "spread" is between the price paid by a buyer and the price charged by a seller.

Some critics claim Malibu is a last ditch effort by Spot Runner, which is backed by big agencies such as Interpublic and WPP, as well as CBS, because it hasn't been able to grow its "long-tail" TV advertising business fast enough, has essentially failed to crack the online search and display advertising marketplace, and so far has had only tepid success with national advertisers and agencies - mainly helping them to implement complex co-op or franchise oriented advertising buys that require a lot of local tags to implement nationally.

But Grouf said Malibu is simply the next logical outgrowth for Spot Runner to fulfill its original mandate of "revolutionizing the way advertising is bought and sold."

Next story loading loading..