Auctions can be efficient, but they don’t work for everything. Especially if the sellers see value for themselves in the inefficiency. That was the message today delivered to eBay from a group of Cable TV networks.
eBay apparently learned it was being dumped via a press release, the corporate equivalent of a “Dear John” text message. Sean Cunningham, chief executive of the Cable TV Advertising Bureau (the trade group which was representing the networks), offered little sentimentality in his words. He said “we were underwhelmed by what we saw on the system and underwhelmed by eBay’s knowledge of our business.” He further added “We don’t believe that eBay is going to get this right.”
eBay had been working with a group of large advertisers since last year to build the advertising exchange. Members of the group included HP, Home Depot, Philips Electronics and Toyota. They had pledged to spend $50m of their advertising budgets through the exchange over the next year.
The automated nature of the eBay exchange was criticized, in part, for removing some of the human element from the media buys. Mr. Cunningham said it "lacked the provisions necessary for capturing critical strategy and idea-driven intelligence during a buy." Rephrased, I think he was saying the proposal by eBay would limit media sellers’ ability to bundle services, or up-sell additional slots.
The breakup underscores an all too often strategic failure with exchange-based marketplaces: that is, all sides (buyer, seller and exchange provider) need to derive defensible, consistent value in the exchange. And efficiency alone, simply making a transaction easier, doesn’t guarantee a good value-proposition for all parties. In fact, efficiency can be disadvantage to sellers if it risks commoditizing their product, or empowers their competitors by making it easier for all to sell and compete directly. Finding an acceptable balance of efficiency and opportunity that meet the interests of both buyers and sellers is not as easy as just creating a forum for sale.
The eBay exchange, if it succeeded, would have been dramatically different than Spot Runner, another firm working on adding efficiency to television ad buys. eBay was going for the big fish with national TV buys and major market advertisers. Its value-add was to provide the exchange, not more. Spot Runner, in contrast, offers an ad-exchange, and is a full service ad agency capable of media planning, buying and creative. Spot runner is also focused not on the national market, nor national advertisers, but rather with helping small local businesses buy ad placements on local TV stations.
In the local market, limited resources on the part of both buyer and seller, make for a better mutual value-proposition. It’s a situation where all parties have more to gain (and less to lose) from participation in an exchange.
If eBay really wants to play with TV ad buys and salvage what it’s spent the last year working on, it might be worth redirecting efforts to compete in the local markets….that’s just a back-of-the-napkin kind of thought.