No More Pencils, No More (Paper Ad) Bookings

After a decade of half-hearted attempts, the advertising industry is taking aggressive steps to put in place an electronic system for buying and selling local TV ads. And it’s not a moment too soon, because pressure to do so is mounting.

In two years, the 1,000-plus local TV stations blanketing the nation will shift to a digital spectrum. This will give each of them the capability to program four different channels instead of just a single analog channel, which has been at the core of the broadcasting system for 50+ years. The result: smaller audiences for each channel and the need to buy and sell many more ads to reach target audiences. A similar increase in the number of radio outlets will also occur.

Last week, in the latest e-biz development, the American Association of Advertising Agencies hired Arbinet, a major digital communications systems provider for the telecommunications industry, to create a massive registry database that would enable media buyers and sellers to exchange the necessary information to buy and sell ads across all media platforms via the PC. The Arbinet system is expected to be up and running by June of this year.

The 4A’s and the Association of National Advertisers have also endorsed a new automated transaction system, spearheaded by the Television Bureau of Advertising, called ePort. It’s specifically tailored for its members (mostly local TV stations and outside sales reps that sell time on behalf of those stations) and clients. That system is expected to be operational in time to process ads that would appear beginning Jan. 1, 2008.

The high cost of processing ad buys has become an ROI issue, agencies say. They cite that they already collectively shell out hundreds of millions of dollars each year to complete transactions and that there is very little tolerance on the part of their clients to see those expenses increase further.

“I sat with a client in November and I asked, ‘Do you want to pay me more to estimate ratings for four TV stations instead of one?’ and she said, ‘Absolutely not,'” said Kathy Crawford, president, local broadcast at WPP’s MindShare. “She thinks she’s paying me too much now.”

Mike Donahue, evp of the 4A’s, said he’s hopeful that the industry would be well on its way to adapting an automated and paperless process for executing ad transactions within the next year. But given the history of delays and failed attempts, some buyers have doubts the transition will occur that quickly.

“This has been going on for a while,” said Maribeth Papuga, svp and director of local broadcasting, Publicis Groupe’s MediaVest, citing a mid-1990s electronic transaction system from Reuters that wasn’t embraced by the industry. That was followed by a system called Mediaport, a joint venture among WPP, Interpublic Group and Omnicom Group that was formed in 2000 but folded in 2002, the victim of the ad recession.

Still, Papuga applauded the fact that the 4A’s and TVB are taking the initiative because a paperless system, she said, “would be a really good thing.” A major challenge, she added, would be to get everyone involved in the ad buying process to welcome the changes.

Up to now, a key inhibitor toward a universally acceptable platform for trading electronically has been that buyers and sellers use many different and incompatible systems at their companies to manage the transaction process.

Importantly, both the Arbinet and TVB services will have an “open architecture” that is compatible with the different systems now in place to purchase and sell ads, such as those provided by Donovan Data Systems and Harris Software Systems.

There are remaining technological issues, however. Crawford, for one, noted that for now, ePort is a one-way system that allows buyers to place orders, but doesn’t allow vendors to confirm or “talk back” through the same system. “The round trip is really critical,” she said, noting that the TVB is committed to addressing the issue.

Today, most ads placed across TV, radio, newspapers and magazines are purchased after a series of phone calls or face-to-face meetings, accompanied by a lot of paperwork—including forms that detail the availability of ads, orders, invoices and amendments—all transmitted by fax machines.

Local transactions are particularly cumbersome because agencies frequently find themselves dealing with dozens of media outlets to execute a single campaign for one client. Multiply that by dozens of clients and numerous campaigns, and the opportunities for lost forms and human error increase substantially, said Crawford.

It’s no secret that spot TV, with its hundreds of different markets and multiple stations within those markets, is a time consuming and complex medium to buy ads from, said Abbey Auerbach, evp at the TVB and the executive at the organization overseeing the ePort initiative.

The lack of a smoother transaction process has cost local TV stations business, she said, because some advertisers and agencies prefer to buy broadcast or cable network television because they can reach many more viewers with a single transaction. “It’s been a major obstacle for us because other media are easier to buy and steward,” said Auerbach. She’s hopeful that ePort will help boost spot sales, although she’s reluctant to say by how much.

“They have to say that,” Papuga said of the TVB, suggesting that it’s a way of motivating stations to get on board with ePort. And it could help, she said, if it allows stations to roll up into a single automated transaction the purchase of ad time on multiple digital outlets and Web sites, which the TVB claims the system will do. “If they can do that then it’s a huge stride,” she said.

Donahue of the 4A’s said while TV and radio would be the first to use the Arbinet system, it’s designed for all media, including newspapers, magazines, outdoor and cable: “We expect that by this time in 2008 the registry will be in use by every single medium to some extent. If we’re not at an inflection point, we’re real close to it.”

MindShare’s Crawford agrees, adding that the industry needs to completely rework the buy-sell business model for the digital age. And getting a workable electronic transaction platform in place is a first good step.