It looks like heavy TV advertisers Wal-Mart, Home Depot, Microsoft and others are turning the tide on traditional television ad rates. These companies have constructed a $50 million coalition to enlist eBay to make a television advertising time auction site. I see this as a stab at the television advertising establishment in a huge way. Even with more ad dollars and customer eyeballs moving off of traditional television networks, as well as cable and satellite television advertising, the networks that operate these channels are playing the hard card and insisting that ad prices won't just drop overnight. Over time, however, this move will force the television networks to lower advertising prices or this auction coalition will do that bidding for them. Power to the, um, advertisers.
Enter some of the world's largest TV advertisers, who collectively seem to be on a mission to force the networks to accept reality, kicking and screaming. This collective effort could drastically drive down television advertising rates and would create a trading marketplace for that commodity akin to a stock market exchange. In a way, many could say that a move like this is long overdue.
Traditional media -- the best examples being music and movies -- cannot seem to understand that the rules have changed. Protection of the old guard is no longer possible, although valiant and outmoded attempts at doing so are still in full force today. The current advertising selling system is so full of holes (it worked great in the 1960s) that it will be interesting to see what the response is to this rather intriguing development in media selling.
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Reader Comments (Page 1 of 1)
8-08-2006 @ 9:39AM
douglas mcintyre said...
eBay TV Won't Work
Stocks: (EBAY)(GOOG)(WMT)(HD)(HPQ)(GM)(BUD)
Several large advertisers are putting together a program that would allow them to produce an auction system for buying national TV advertising time. The program is called e-Media Exchange.
In theory, the move is brilliant. It would allow advertisers to purchase time through an auction system instead of through direct negotiations with networks. One smal cable network, the Discover Channel, may test the system. Wal-Mart, Home Depot, Hewlett-Packard, and Lexus are amoung the companies that may participlate in the experiment.
The system is similar, in some ways, to the auction of keywords at Google. That process in ongoing throughout the year and operates in real-time. The TV ad auction would function by buying advertising based on demand for programming instead of on rates set by the networks and then negotiated by companies who want time on specific programs or against specific demographics. Much of the TV ad inventory is sold in the months before each TV season starts, in a system called "up front" buying.
The flaw in the system is probably the strength that the largest TV and cable networks have to resist a new method for buying advertising. The largest advertisers cannot afford to hold out while the new system comes online. The auction program may be dead on arrival as huge purchases like GM and Budweiser continue the traditional system of buying the programs they want at the times they want. This kind of targeting is probably worth a premium of some level. And, the networks are happy to oblige them.
Douglas A. McIntyre can be reached at douglasamcintyre@gmail.com. He does not own securities in comanies that he writes about.
12-03-2006 @ 9:34AM
online auctions said...
I don't think this is such a bad thing. As a matter of fact, it is better for new entrants who don't have large budgets like some other big corporations that dominate certain markets.