Posts on Electronic Marketplaces

January 29, 2008

Advertising Market Disruption According to IBM

You expect a scrappy insurgent startup to talk Disruption. Hearing IBM talking "disruption" is, however, much more amusing. IBM's last report on the media sector is entitled The End of Advertising as we Know It. The report does not pull any punches.

The next 5 years hold more disruption for the advertising industry than the previous 50 years, according to Big Blue. Apparently open advertising exchanges will replace traditional media wholesalers and agencies.

A strong concensus opinion, according to IBM's industry poll, is that open advertising exchanges will take 30% of revenues currently won by traditional media. The figure must be in the 5% to 10% range currently. With Google's adsense leading among exchanges with around 50% of online advertising. Yahoo and Microsoft are desparately trying to muscle in.

The big looser will apparently be the 30 second TV spot.

IBM's solutions for traditional marketing agencies? If you cant beat them, you join them. Buy yourself a new business model and infrastructure (preferably from IBM), and hook into these open exchanges. This is not the first market that has succumbed to electronic trading.

Technorati Tags:

July 29, 2007

Microsoft Acquires AdECN Electronic Advertising Marketplace


AdECN independent advertising exchange is independent no more. Microsoft has acquired it. AdECN was aiming to be for banner advertising, what AdWords is to text based advertising, as I described a few months ago when AdECN was prospecting the UK. William Urschel, founder and chief executive officer, AdECN states:

"Joining forces with Microsoft will provide the capital and resources to enable AdECN to scale the exchange at a much faster pace, making it more attractive to the advertising networks and other traffic aggregators looking to better serve their advertisers and publishers.

The move adds to pressure on traditional marketing agencies margins. Microsoft now joins Google in dis-intermediating agencies out of online advertising. A great move for publishers and advertisers.

And The Bad News

With a dependent exchange, where the exchange is also a publisher, other publishers inevitably compete on unequal terms. Google's Adsense advertising platform shows little of how campaigns are sold to different web sites, and the margins it makes on the sale are secret. William Urschel, nevertheless, pledges to continue with his vision of transparency,

All of us here are thrilled to join a team that shares our commitment to neutrality for the exchange and also believes that creating liquidity and intelligently matching supply and demand will be two of the most important roles for a technology provider to play in this rapidly growing and evolving market , William Urschel

Microsoft also states that it will maintain the Exchange's independence and transparency

Rather than an ad network, a true ad exchange is the neutral, transparent, automated connection between multiple ad networks. Both groups will benefit from the exchange’s neutrality and transparency, enabling them to make more informed decisions about their bid and ask decisions. Microsoft on AdECN

I remain skeptical. It would require exceptional governance for Microsoft to respect this statute at the expense of profits. The press release mentions the term "ROI" five times. Most likely prices, buy/sell margins and volume allotments will become as opaque as Google's.

We are down to American Association of Advertising Agencies (AAAA) and their subcontractor arbinet, to create an independent exchange where publishers have equal rights, and the market has visibility over how inventory is bought and sold.

[Via Read/Write WEb: Microsoft Buys AdECN Ad Exchange]

Technorati Tags: ,

April 21, 2007

Google Aiming for the Radio Advertising Marketplace

google audio

Google's pursuit of the advertising marketplace continuous relentless. Though radio advertising is unrelated to organizing the world's information, their Audio Adwords is looking to impact the advertising agency sector hugely.

adwords audio

More businesses are trying Google radio Ads in their Adwords account. The reviews from testers seem generally positive.

The air time available has now been extended to a supposed 675 radio stations. Though, like for Adwords, Google will not reveal its media list. Given what Adwords and Adsense have done for online media publishing, Google's Audio Adwords could revolutionize radio station economics, be it traditional air-wave or podcast radios.

I am impressed by Google's solution to the problem of creating the audio spot. Composing an audio spot is harder than making an Adwords text box. Writing, composing and recording requires experience, training and a technical setup. Google provides a crowdsourcing marketplace tool, where you can invite audio industry professionals to bid for the design and recording project. The electronic job board allows up to five professionals to bid on your audio project.

The tariff rate for airing the radio spot is the same as Adwords; CPM, cost per thousand listeners. Plus, testing is easy and cheap. You can try different stations, zip codes, demographics, airing times and find the slots that best work for you. Split testing becomes feasible for small merchants.

The possibilities for the new radio ads marketplace are dizzying. Just like Adwords catalyzed a whole online publisher industry, the potential for economic growth in complemeting sectors are great investment areas.

The only stakeholders loosing out are the creative advertising agencies who currently hold a near-monopoly on mediating between advertisers and radio stations. The creative added value provided will be crowdsourced out; brand design and innovation will be the only added value left to them.

[Via Nick Piggott]

Technorati Tags: ,

April 20, 2007

Google Long Term Enemy of Advertising Agencies

Sir Martin Sorrell, the WPP Group chief executive, bills in excess of €40 billion euros in advertising and marketing services. His views of the doubleclick acquisition are understandably apprehensive, he states
"It's going to be very interesting to see how it shakes out. We buy about $200m of their media and that's up from about £150m last year. Google is a short-term friend and a long-term enemy and probably the shorter term just got a little bit shorter and the longer term got a bit closer as a result of the DoubleClick acquisition,"

"It raises issues as to whether we are happy to let Google have our clients' data and our own data, which Google could use for its own purposes in contextual and targeted advertising."


Doubleclick is one of advertising agencies preferred banner campaign management tools. Its software pioneered the start of banner advertising in the late 1990s. Its current DART version, which we use at Enclick and Hispavista, allows advertising managers to optimize banner servicing per a demographic and per user.

Doubleclick also provides value-added services like email marketing and search engine marketing, ppc and data feed campaign management. Essential value added services for marketing agencies.

Though Doubleclick also offers its own in-house marketing agency service, it has nowhere near the level of threat and reach of Google's Adwords advertising. Google has deftly acquired one of the top online advertising management tools. With Google's clear intent to dis intermediate the online advertising value chain, the Doubleclick software is now a sword hanging over the inefficient advertising agency market.

Google can now clear a path for merchants to plan, deploy and manage the lucrative CPM-banner advertising, directly onto publisher websites, just like Adword campaigns. The move is inline with Google intention of creating a transparent and efficient advertising marketplace.

Unfortunately, as with much of the search engine marketing, this largely bypasses the advertising agencies, leaving them without the high-margin brand-CPM campaigns. Nevertheless, Google is disingenuous in denying the increased conflict; Dennis Woodside, the managing director of Google UK, Ireland and Benelux, says

"We are talking about a competitive market. Users have a huge choice about how they search information. There are a lot of ways an advertiser can get out to market. There's nothing stopping them going to any number of online companies.

Yes, the market is competitive, but if Google offers the Doubleclick services for free like its Urchin/Analytics, the market just got a hundred times more competitive for advertising agencies. The market will become a lot more transparent; the end-of-year kick-backs that publishers must pay advertising agencies to be included in their media buying might disappear altogether.

[Via Google is a long-term enemy says Sorrell - Brand Republic News - Brand Republic]

Technorati Tags: , ,

March 22, 2007

Google Enters Affiliate Marketing

google adsense

Google has finally unveiled its Cost Per Action tariff model for its Adsense network. What was the exclusive domain of affiliate marketing networks is disrupted by Google's huge publisher and merchant base, and its superior system. In one move, Google becomes the biggest affiliate network in the sector.

The impact on the online advertising ecosystem will be considerable. Not only to affiliate networks, but also to the community of market makers - affiliates, which have thrived on arbitrage opportunities around CPM, CPC and CPA advertising. CPM (Costs per Thousand banner impressions), CPC (cost per click) and CPA (cost per action). The different tariff models provided enough market inefficiency for price imbalances to arise.

Over the last few years entrepreneurial affiliates have been acquiring traffic from Google's adsense at the minimum 0.01 per click, and driving it directly to an affiliate network merchant's site under the CPA tariff model, and got paid when and if the customer converted. The arbitrage actually resulted in positive margins. And many other similar arbitrage moves.

Google's offer of the CPA tariff model to advertisers adds new price transparency, as clients can now work out the ROI of all three tariff models on one simple user interface. The arbitrage opportunities will invariably dissappear.

Clear winners are advertisers; CPA tariff model pushes the onus of conversion onto the publisher. The advertising merchant only pays if the clickthrough actually makes a purchase. CPA is the solution for advertisers with click-fraud problems.

[Official Inside AdWords: Pay-per-action beta test]

Technorati Tags: ,

March 15, 2007

Structuring and Regulating Advertising Market Places

On the subject of electronic market places, one of the key issues in the new marketplace is how much the products can be structured, and how much the buying/selling needs to be regulated.

In eBay's media marketplace, buyers will be able to submit Web forms akin to requests for proposals specifying what dates they want to run ads, what their budget is, target demographics they seek in the audience and other information. They then invite networks to review their proposal. Sellers also will have the option to initiate auctions, following the eBay model, where they specify the ad space they have available to sell and choose the highest bidder. The same model as ebay's main buying and selling model.

A model similar to the unregulated over-the-counter marketplaces in banking.

The AAAA has contracted Arbinet to structure the marketplace more. Using the financial regulated exchanges model, the AAAA is creating a registry of buyers and sellers and their respective needs to structure the marketplace with formats and standards. A standardised market allows easier and confident trading, which leads to much higher volumes, higher liquidity and market makers.

Technorati Tags: ,

March 12, 2007

Electronic Marketplaces Coming to Advertising


The American Association of Advertising Agencies (AAAA) is creating an electronic platform for trading ads across media. The Association is bowing to the inevitable and modernizing ad space buying and selling.

Advertising agencies have historically leveraged their personal relationships, privileged access to clients and media, and poor price and inventory information to generate large buy-sell margins. The practice of end of year kick-backs from media publishers to ad wholesalers to ensure continued patronage is still rampant.

Incumbent agencies and institutions will fight to retain their place and margin in the value chain, in spite of the dis-intermediation alternatives.

"The world is changing faster than we can keep up with it," said Ray Warren, president of ad agency Carat Media Group Americas.

"Phones will still work....It's just a way to communicate electronically." said Peggy Green of ad agency Zenith Media USA.

Electronic trading is the natural solution for such inefficient markets. AdECN, an independent trading exchange platform for advertising is already online. Google and eBay are deploying the private marketplace platforms into adverting media buy and selling. Google is introducing radio ads onto its Adwords platform, in addition to ads in magazines, and ads in newspapers.


eBay, in turn, has its private marketplaces; eBay Media Marketplace is to go live in a few weeks. While marketers like Lexus, Hewlett-Packard, Microsoft and Home Depot are participating in eBay Media marketplace, no cable networks have signed on yet.

As ever, volume on these trading exchanges is an all or nothing proposition; community of buyers and sellers tip from one market platform to another en mass. Similar migration of buy/sell volumes have been occurring between trading exchanges in the financial market since the first electronic exchanges appeared in the 1990s.

city open outcry trading

I lived through just such a loss of trading volume while at the London Financial Futures and Options Exchange during the mid-1990s; 30% of our trading volume deserted from our trading pits onto Frankfurt's electronic trading platform. The automated platform fees were 10% of our trading fees and the buy/sell spread margins were narrower. Our response was to close the open-outcry trading pits with their 3000 colourful pit traders, and launch a competing electronic exchange, CONNECT (TM).

The only alternative left to media agencies is to own and host the new electronic marketplace.

Technorati Tags: , , , ,

February 19, 2007

Electronic Buying and Selling Coming to Online Advertising


Though long time in coming, electronic buying and selling enters the Online Advertising sector. Just as electronic trading revolutionized financial markets, eliminating middle-men and reducing the buy-sell spread, so electronic trading has finally entered the advertising market.

Google braved the way with its electronic bid based buy and selling of pay per click advertising. Now AdECN Exchange has introduced bid based buying and selling of straightforward advertising, page view based advertising.

Upto now the market for banner based advertising was illiquid and inefficient. Advertising agencies commandeered a large percentage of the fee, widening the buy-sell spread for publishers and advertisers. Worse, the bulk of the inventory beneath a publisher's home page remained unsold. Now AdECN exchange brings visibility and efficiency into buying and selling page-view inventories; the buy-sell spread will come down from its current 30% to single digit percentages, just as in financial markets. Plus a much larger percentage of unsold inventory will be visible to advertisers. Good news for the markets, not so good for the advertising market intermediaries.

Sophisticated advertisers will embrace the new electronic market by adding analytic and technical capabilities to the buying team. Just as investment banks added quantitative and analytic trading PhDs to their investment teams. Electronic trading is already used to buy search based, pay-per-click advertising; extending electronic purchasing into pay-per-view (CPM) advertising should not be a stretch.

Technorati Tags: ,

June 28, 2006

Is Electronic Trading the Future of Advertising Buy ?

Jonathan Wall, Marketing Director at the top online electronics store in the UK, explained at Internet World 2006 that his marketing team is now composed principally of web analytics experts who are constantly trading on the screens for the best prices and return on investment for their advertising spending.With revenues in excess of €300m and an online marketing budget rumoured to in excess of €25m, can the web analytics team be the future model of marketing teams?

Jonathan's vision could not be more different from the traditional marketing department, with its one-stop-shopping of TV upfront and the big-media lunch circuit. Compared to the accountability forced onto internet marketing, the TV advertising industry is wasteful, untargeted, irrelevant, and ultimately damned irritating to your customers.

advertising screen web analytics trading

The change has similarities with the modernisation of financial market trading. Traditional buying and selling of financial assets was based on open outcry system. The prices at which customers were able to sell their assets depended on a chain of human interaction which ended in the open outcry buying and selling trading pit.

city open outcry trading

The open outcry system was plagued by inefficiencies, trader cartels which pre-arranged price and articificially increased price spreads and margins for the traders and banks. As a result the price spread, difference between the buy and sell price for the clients and suppliers was large.

Talented traders could read their fellow traders and manipulate larger spreads for themselves.

Most of these human intermediaries have been taken out of modern financial trading. Open outcry trading has become mostly extinct, replaced by electronic trading. The buy sell spreads, and the cost of trading have dropped dramatically.

The inefficiencies and huge cost of face to face trading has been replaced by zero overhead direct screen trading. The client has real-time access to real prices and can trades directly with suppliers.

technical trading desk

Google Adwords bidding is a copy of financial screen trading. Though the spread, the margin retained by Google is still a large inefficiency, that will come down as other online advertising networks, like Yahoo Search Marketing start to compete on more level basis.

The world of advertising is heading towards a big change. Gone are the days of inefficiency and un-accountable media channels. The new trading in advertising buy is electronic and transparent, and completely accountable.

Technorati Tags: , , ,

About Eucap

Electronic Marketplaces

Some rights reserved
Creative Commons - Some rights Reserved

Save the Net