Upfront Preview: Behind the Bust

It seemed like a good idea at the time back in 2005 — scrapping the upfront marketplace and instead making national TV time available on an electronic auction platform for advertisers to bid on. At least it did to Julie Roehm, who was then director of marketing communications for the Jeep, Dodge and Chrysler division of DaimlerChrysler, and a handful of other big national marketers.

Roehm commanded a lot of attention when she presented her radical proposal for rearranging the TV buying process at the Association of National Advertisers TV Forum five years ago — as would any executive with roughly $2 billion in budgetary clout. But it became clear quickly that the major broadcast networks weren’t interested for fear of devaluing their inventory. Randy Falco, a top NBC executive at the time, called the suggested switch “ridiculous.” Other nets made it clear they felt the same.

Ultimately, most of the major cable networks also refused to go along, citing similar concerns. The tests that followed in 2007 with eBay, which was chosen over Google after an RFP process to build an auction-based national TV trading platform, followed a game plan with drastically reduced goals. Replacing the upfront was by then no longer in the cards, and marketers tried to position the auction option as an alternative to the scatter market.

But even with those scaled-back ambitions, eBay and a core group of marketers joining Chrysler that included Home Depot, HP, Intel, Toyota and Brown-Forman couldn’t generate much excitement from the rest of the industry for the auction proposition.

In June 2008, after little more than a year of trials, eBay called it quits with a terse statement that shed little light on what went wrong: “We have been refocusing our resources on our core marketplace business and have determined that this initiative did not warrant continued time and attention.”

Around the time that eBay rolled out its system — spring 2007 — Google TV launched its own TV auction platform using Dish TV inventory and, importantly, access to Dish set-top box viewing data. Google TV has since added a limited menu of inventory from some NBC Universal cable properties and a handful of other cable nets such as Game Show Network, Hallmark and CBS College Sports. That system is still up and running, but it’s widely perceived as a market for smaller advertisers with shorter-term planning strategies and direct response ads.

Google declined to disclose what percentage of its ad sales are for DRTV, but that’s precisely the market that some agency executives believe the auction model could successfully serve in the national TV space.

“DRTV might be the best application,” says Steve Farella, CEO of New York-based TargetCast tcm. “The way it is sold and bought now is in fact a manual exchange.” Farella estimates that perhaps 5 percent of national cable inventory is slotted for DRTV. Since “it’s hard to call everyone,” he adds, an automated auction exchange would benefit both buyers and sellers.

DRTV market aside, why is “auction” such a dirty word in the mainstream network TV space? Lots of reasons, buyers say. “There’s a place for auctions but not for offline,” says Rino Scanzoni, chief investment officer, WPP’s GroupM. “Auctions work when you have extremely large supplier and inventory bases. You also need limited parameters; you can’t weigh 30 different factors.”

In the online world where there are 20,000-plus commercial Web sites, Scanzoni explains, “That creates an abundance of supply that can’t be absorbed by the advertising demand for those sites, so the opportunities for exchanges become more significant.”

In the national TV space, where the supply of inventory is much more limited, an auction system would have the effect of raising prices — clearly not in the interest of clients. Scanzoni also notes that network TV clients each have separate pricing bases, which have been established over time and are tied to factors such as the number of years a client has been doing business with a network, the size of inventory packages and to what extent they are spread over different properties within a media owner’s portfolio.