Wednesday, June 13, 2007
Bid4Spots' Dave Newmark Speaks On eBay Deal
Last week, Encino-based Bid4Spots (www.bid4spots.com) turned heads with a deal with online auction giant eBay, as word of a partnership to provide eBay's emerging Media Marketplace with radio auction services spread. Bid4Spots provides a reverse marketplace for selling unsold radio inventory--where radio stations, not advertisers, do the bidding--and the lowest CPM wins. The firm's radio auctions are actually opposite of eBay, where prices are bid up--radio stations bid who will provide the most exposure for the lowest price. To get the details of the eBay deal, we spoke with Dave Newmark, CEO of Bid4Spots, to get a bit more about the relationship with the firm and eBay and how the firm's business is shaping up. Dave also gave us his thoughts on where this puts eBay versus Google's effort in the radio industry, and the interest of the online players in radio advertising. Ben Kuo spoke with Newmark.
It seems like this is a huge deal for you, can you tell us some of the details?
Dave Newmark: The simplest cut is that they were charged to create a media marketplace--which is called eBay Media Marketplace--by a group of large advertisers and advertising agencies. Having developed their marketplace, I think that they began to look for a way to expand beyond it, and probably felt that a really good fit for the base of users would be radio. Their marketplace serves small businesses who don't have a large budget for production for television, for example, but still have stories to tell. Once having decided that radio was an attractive media sector to pursue, they looked at different approaches, and we were on their radar screen. At the same time they were thinking about that -- and I'm putting these words in their mouth, I don't know what they were actually thinking -- we were looking for a way to find more advertisers for our platform, because we had such cooperation from the stations.
What's the form of the business arrangement?
Dave Newmark: It's a commercial agreement. It's a fairly standard commercial agreement where there is revenue share.
How is this look to the users--is this cobranded with eBay?
Dave Newmark: We are providing the eBay Media Marketplace with a doorway into our system. What than means, is that sellers--the radio stations--remain in our auction system. The sellers do not have a relationship with eBay, only the advertisers do. So when an advertiser signs up in the Media Marketplace, they are essentially coming into Bid4Spots through a different door. The radio stations do not see a distinction between the advertisers when bidding--that is, in bidding, all advertisers are equal whether directly from Bid4Spots or from eBay.
How long was this deal in the works?
Dave Newmark: We met in November at ad:tech in New York, and the deal was signed in February.
Does this deal put eBay head to head with Google in taking on the radio advertising market?
Dave Newmark: I can't speak for them, and I don't know if there is any kind of design in that regard. But I will say that my personal belief is that the two companies came to radio about the same time on different paths. Google is a search company, and I believe they were making this move in response to the desire by their advertisers to find more customers. I think that Google felt it could leverage its AdWords advertiser base to help radio stations' bottom line. They could do so, perhaps by using their dMarc platform, though their platform which requires integration with stations and software automation. eBay, on the other hand, didn't start with that. They started with the charge of creating a media marketplace with agencies and advertisers. Once getting into that market, I think they made a strategic decision to build on that. They both ended up in the same place. Of course, that's just my own thoughts on that.
Are the buyers for radio airtime the same as those for online clicks?
Dave Newmark: I think they are. I think they're looking and casting about for additional things that are cost effective. From what I hear, ROI on online advertising is getting harder and harder. With increasing CPMs, the ROI is getting worse. I think people who measure that sort of think are looking for value in their advertising, in any way they can get it. Ultimately, that's what Bid4Spots does really well--deliver value. What I mean by that, is you get a lot but pay relatively little for it. There's a specific reason we deliver so much value, it has to do with the moment in time when an auction takes place. It's important to understand, that these sellers would much rather, and in most cases do, sell their inventory at premium rates. But, when the next week is coming about and it's Thursday morning, there's little chance they can monetize that inventory. It's very much like unsold seats on an airplane that's about to take off. They are worthless when the plane is in the air. Those slots are worthless if not filled with commercials, and they are willing to dramatically reduce their rates. This is not a new problem for radio stations, it's problem probably as old as radio itself. So what we did was figure out a way to overcome the "fear factor" of monetizing inventory. That fear factor was the fear that by selling time at dramatically reduced rates for a slot, you are devaluing your inventory for future sale. The thought was it's better to not sell at all. What I identified was that they key element of the fear was the rate. So what I did, was we went right up to the line and disclosed everything to the advertiser--the advertisers wants to find out everything they could, and control everything they could--to the last element, the rate itself--which we won't disclose. Unlike other methodologies that advertisers have had for selling so-called remnant radio, we said that this can be like a regular buy--you will not be bumped, you will not have to run in the dead of the night if you don't want to, you can control the day part, you can control the market, and you can control the format, and you can know precisely what stations you are on, how many times, and which day parts. You just can't know the rate. That single element was enough to overcome the fears of the stations.
Explain what you mean by they don't know the rate?
Dave Newmark: The advertisers know the stations, the markets, the day part, and the frequency, they just don't know the rate per spot. I'd also like to point out a few things where there is a growing misunderstanding that the advertisers do the bidding. I want to point out, that it's a reverse auction, where it's the stations doing the bidding, and where the lowest CPM wins. It's not the advertisers doing the bidding, it's the complete opposite of eBay. That's a mistake that has been creeping into reports.
One of the other things I'd like to answer is: who are we do to this? Why Dave and Patty Newmark, why not Google and Yahoo? I think the answer is because of our relationships. Our relationships with the industry. What makes us different is the sellers know us, from our other agency, Newmark Advertising. When we came up with this idea in 2004, we talked about it with them. In a sense, it was a partnership. They know us as partners, as buyers in Newmark Advertising. That gave us the inventory footprint we needed to start doing this. I think that Internet companies often make the mistake of sitting in their secret rooms and coming up with The Answer (capital T and capital A) --and presenting it to the marketplace, but because it hasn't been collaborative, it fails. That's what happened in the dot com boom days, when I looked at this. There were a number of companies that all had forward auctions against visitors, much like keyword advertising--and that was a mistake. We talked with the buyers, and sellers, and are the partnering type. We had the relationship with the sellers, which is the key point.
Thanks for filling us in!