A Tale of Two Auctions: How Radio Outpaced Cable

NEW YORK For close to a year, online auctioneer eBay has been working with advertisers, agencies and cable networks to establish an Internet-based marketplace for TV ads, but it hasn’t had an easy time of it. A similar marketplace for radio ads has been in the works for about half that time, but the process went much more smoothly.

Both went live last week. When the radio platform became operational, after eBay signed a high-profile partnership with Los Angeles radio auction system Bid4Spots, it received a lot of attention, while the cable marketplace went live with much less fanfare. Why the difference?

Sources identified the first advertisers for the cable marketplace as Home Depot and Intel, both of which submitted formal requests for packages of cable time from select networks that have registered with the site. Sources also said Microsoft and Lexus are preparing RFPs that will be submitted to the system in the coming weeks.

But eBay’s first completed media-time transaction may well be for radio spots. Bid4Spots has been conducting online radio auctions since 2005, and last year advertisers bought about $2 million worth of remnant radio time through the system, according to Bid4Spots CEO Dave Newmark. Under the terms of service, the more than 2,300 participating radio stations pay a 15 percent commission when they sell time through the system. Now eBay will take a cut of those fees while providing Bid4Spots a greater potential pool of advertisers, Newmark added.

EBay director of trading platforms Howard Rosenberg declined to speculate on why the radio business has embraced auctions while the cable business remains largely skeptical. “I don’t know what’s behind the reluctance,” said Rosenberg. “The two markets have very different dynamics.”

But Newmark said: “Two words: new money.”

The auction enables the radio stations to boost their revenue by selling additional advertising time, albeit at reduced rates, that would otherwise go unsold. Many cable networks, on the other hand, have balked at participating, fearing the process would commoditize their business. Media agencies are divided about whether the proposed service is beneficial. Some, like Aegis Group’s Carat and Interpublic Group’s Magna Global, support the system because it would save time on “tonnage” buys and allow staff and resources to focus on more complex negotiations involving multiplatform agreements or broader marketing programs.

But other agencies such as Publicis Groupe’s Starcom don’t see the value. In fact, Starcom CEO John Muszynski commented in March at the Association of National Advertisers’ TV Forum that it was “a waste of time,” agreeing with those networks who say it commoditizes inventory.

Last week, Rosenberg rejected that notion, arguing that the cable marketplace eBay has set up is not an auction, but rather an electronic platform for conducting business. “Advertisers create specs around what they want to buy, providing budgets, GRPs, demos, dayparts and so forth,” he said. “They also indicate which networks are invited to make offers, and there is even a mechanism built into the system for negotiating. So it’s much like how business is conducted today.”

By contrast the Bid4Spots process is an auction model, or more precisely a “reverse” auction, where radio stations compete to sell advertisers spots within days of airtime for the lowest acceptable rates. Auctions are held every Thursday.

Rosenberg said no cable deals had been concluded yet, but declined to comment on progress in convincing more networks to participate in the fledgling service. “The marketplace is at a very early stage from a design and functionality standpoint,” he said. “We’re soliciting feedback to make it a more valuable tool.”

To date, only the Oxygen network has confirmed that it is participating in the service. Many other cable networks, however, have at least taken the preliminary step of registering with the service, according to sources.

Meanwhile, Rosenberg said that eBay would focus on cable and radio for the foreseeable future before expanding to other outlets.