• by Arnel Leyva , October 3, 2011

The key to winning in any investment market is the ability to value assets accurately. Those possessing this facility have a huge advantage in inefficient markets.

Asset-valuing technologies developed for securities trading led the way. Search engine marketing pioneered the application of this approach to advertising media. Moneyball showed the way in baseball.  But television advertising still is digging in its heels. This means opportunities for marketers that choose hard data over hardened beliefs.

In the book Moneyball (now a Sony Pictures Entertainment movie) the author Michael Lewis weaves a story around Oakland As General Manager Billy Beane's use of esoteric statistics-known as Sabremetrics-to capitalize on overlooked baseball players with undervalued talents.

The baseball establishment sawBeane as presumptuous and preposterous when he allowed data heathens into the priesthood of baseball scouting. Traditionalists trust that the honed eyes and seasoned guts of baseball scouts are the best tools to identify the characteristics of the future performance of a player.

Baseball scouts ignored performance data just because a pitcher had a weird wind-up or a batter had a strange stance. They overvalued batting average over on-base percentage or won-loss record over earned run average. But because the Oakland As of the early-2000s managed to win consistently against much richer baseball teams, while spending a small fraction on player salaries, the rest of Major League Baseball took notice.

The Boston Red Sox adopted the Sabremetrics philosophy and combined it with resources second only to the New York Yankees. This produced multiple World Series wins during the mid- to late-2000s.

The secret is out. Today less inefficiency exists in the Major League Baseball player market on which small market teams can capitalize.

In parallel, the paid search keyword marketplace came along and showed marketers that advertising media could be traded openly on an exchange. As with any new auction market, it was rife with inefficiencies that only rose with liquidity levels. But the keyword marketplace was built upon the tenets of transparency, accuracy and, above all, quantity of data.

Securities trading algorithms were adopted and applied, and it quickly became one of the most efficient auctions the world has ever seen. Ask any keyword trader-getting a leg up in paid search now is more about flawless execution of best practices than unearthing market inefficiencies.

This model has worked so well that online display advertising adopted it through ad exchanges and demand-side platforms. So where can marketers find undervalued "players" that the establishment has overlooked due to lack of data transparency and outmoded performance metrics?

The last bastion of extreme inefficiencies: TV advertising. And where can marketers identify and profit from these undervalued assets? (The last thing I want to do is help this company gain a larger footprint in yet another media channel, but I love telling others about a deal as much as I love getting one.)
There is a sale going on at Google TV Ads.

The company's motto supposedly is "Don't Be Evil." In practice, however, it is "Make media markets efficient by providing open data access, and then profit from the transactions." Advertisers can buy the same television spots on major cable networks at a fraction of the predominant cost through Google's distribution partnership with the Dish Network. Open access to data gleaned from EchoStar set-top boxes and presented next to Web data allows for a level of performance analysis that exposes the Nielsen ratings box for what it is: "Mad Men"-era technology.

The inefficiencies in the TV advertising market stem from the dearth of data available to understand performance. Marketers end up overvaluing and paying a premium for television media bought directly from the networks. If marketers can get over the quirk of buying television spots from a search company  -- and I don't care that Google has spread its tentacles to other media, search still generates the lion's share of the company's revenues -- then they will have access to data that lets them play "mediaball."