Bid4Spots vs. Google Audio Ads? EXCLUSIVE 'Real Deal' CEO interview on radio battle
Bid4Spots runs weekly reverse auctions where radio stations (sellers) bid for the advertiser’s (buyer’s) budget; Spots selling for the lowest CPM (Cost per Thousand) win.
Dave Newmark, CEO, founded Bid4Spots last year. I chatted with him about Bid4Spot’s business model, its upcoming initiatives and competing against Google dMarc Audio Ads.
Q) You have many years of radio advertising experience through Newmark Advertising's personality endorsement radio services. How does the Bid4Spots model solve problems you have encountered in making radio advertising buys?
Overall, I think radio sellers and buyers do a fine job of transacting business for schedules that would air in the next month or next year. Advertisers know, however, that even the top-rated stations in every market are left with unsold inventory, and advertisers would love to access that inventory at a reduced rate. Stations, for their part, are loath to discount inventory at the last minute for two reasons: they don’t want to train advertisers to wait until the last minute, and they don’t want to devalue their inventory for future sale. So most stations just give existing advertisers free spots, which, of course, effectively devalues the inventory anyway.
So, buyers and sellers of last-minute inventory needed a better way to access/monetize that inventory. That was my mission when I conceived the Bid4Spots business model as a reverse online auction. Advertisers get tremendous value out of our reverse auction format: competition drives rates down, they’re allowed to specify daypart, and their spots are not pre-emptable. This level of control is unusual when buying last-minute time.
Stations gain a risk-free way to sell airtime that otherwise would have gone unsold. They’re protected by knowing that their rates are confidential, not revealed to the advertiser, safely cloaked behind the system’s ranking index. And we schedule the auctions once a week for just a few hours, so the process is fast and easy for everyone.
Q) Bid4Spots just celebrated its one year anniversary? What are the key lessons learned? Will you do anything differently in your core weekly online auctions of radio spots in year two?
About half-way through Year One we introduced a few tools to simplify the process even further for participants. We created “PowerBidder” to make it easier for stations to bid, and online billing capabilities to make it easier for advertisers to see how much money they have with us at any given time, much like online banking. These improvements have been a huge help to both sides. As for doing things differently, we’re discovering that the model may vary from country to country, as we expand internationally.
Q) Google is nearing a one year anniversary as well. Google acquired dMarc Broadcasting last January to bring its "targeted, measurable advertising" to radio. You are a newly formed company, how will you successfully compete against resource intensive Google-dMarc?
Bid4Spots is fairly new, but our roots in this space are deep – I’ve been in both advertising and radio for more than 25 years. We know how to build marketplaces and tools that will meet the needs of both advertisers and radio stations.
As I see it, to the radio stations there are two defining differences between Bid4Spots and Google Audio: Confidentiality of rate, and control. As I mentioned earlier, our ranking index system, which bases price on CPM, enables stations to bid while keeping their rates confidential from one another and from advertisers. When prices are this low, they must be confidential. Stations also seem to prefer the control we allow them; in our system, they decide whether or not to bid, how low to go, and which spots/campaigns to bid for. It’s completely flexible, they can even pull out of an auction before it closes if they need to.
To the advertisers, value is the key. While Google Audio will certainly have some interesting technological aspects to the buy, at the end of the day, most advertisers want value, to get a lot and pay as little as possible for it. Our system does that better than any other. Advertisers also want to know that their spots will run and unlike Google’s system and others, spots won by stations in our auctions are not able to be pre-empted. If a station wins, they must run the spots. Also, if a station wins in morning drive, they have to run the spot in morning drive, not in overnight or some other daypart.
Obviously, Google is a large and successful search engine, but, as you know, transacting advertising placement in the traditional media world is very, very different. It remains to be seen if a company steeped in online search can translate that success into something that works for traditional media buyers and sellers. And it remains to be seen whether AdWords advertisers who are used to the precision targeting of key word ad placement will tolerate the mass-appeal world of broadcast where listeners aren’t just interested in one particular product or service. It also remains to be seen whether ad agencies will turn over their media buys to a company that many feel is intent on putting them out of business.
Q) Google CEO Eric Schmidt has indicated he is targeting a 1000 strong radio team. How will that change the dynamics of the industry? Will Bid4Spots be impacted?
We have amazing support from ad agencies and stations all over the country. I think advertisers and the media think of us as David, literally, against Googliath. So, today, we are having amazing success getting ad agencies, advertisers and stations to work with us perhaps because Google is out there and they want the “little guy with a great idea” to win. Anyway, the more Google talks about their plans to add armies of people and revolutionize all online and offline media buying and selling, the better our business seems to get. I think the more attention they bring to the space and the longer it takes them to figure out exactly how to access top station inventory, we have a wide open door to expand and evolve.
Yes, they can, because the Bid4Spots reverse auction is for last-minute inventory, airtime that hasn’t been sold as of the Thursday before the broadcast week. When stations sell through us they’re actually making more money than they would otherwise, since that unsold inventory would most likely be given away for free.
Q) How much traction has Bid4Spots obtained within the a) media buyer and b) radio station communities?
Our marketplace for terrestrial radio is used by 2,300 radio stations nationwide, representing nearly all of the top 300 U.S. markets. It’s used by over 1,000 advertisers including more than 180 ad agencies, effectively making it the largest radio advertising network in the country. By the end of 2007, we should have just about every radio station in America signed up. The reason I can say this is that signing up simply allows us to invite stations to bid; they are not obligated. Adoption by advertisers and agencies, traction, as you say, will continue to grow as they understand our system more and more. I should say that since we just announced our Internet Radio initiative, there has been enormous interest in our program.
Q) On January 16, 2007, Bid4Spots will hold its first auction for independent online radio broadcasters? What are your expectations for the new initiative?
The potential for this marketplace is huge. Arbitron/Edison Media Research reports that 52 million Americans listened to Internet radio over a one-month period earlier this year; industry observers estimate that about 42 million of those listeners tune in to an estimated 25,000 independent online broadcasters. But so far, there’s been no effective way to aggregate the independents on a common platform for advertisers who want to reach those listeners. Despite their reach, these independent broadcasters receive little or no revenue, and are essentially invisible to the advertising community. The potential size of the independent Internet radio advertising market is estimated at $500 million.
So we’ve adapted our reverse auction model to facilitate buying and selling of advertising for independent online radio. Advertisers and ad agencies gain simple, cost-effective access to Internet radio’s targeted, affluent and tech-savvy audience. Internet broadcasters get an easy, flexible way to sell advertising and increase revenue.
THANKS DAVE!
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