Interpublic Teams Up With TV Companies to Build Automated Ad-Buying System

Updated August 19, 2013, 7:34 p.m. ET

Interpublic Teams Up With TV Companies to Build Automated Ad-Buying System

SUZANNE VRANICA

When it comes to television ad sales, Madison Avenue has barely moved since the “Mad Men” days of the 1960s, with deals struck over the phone, via fax and, in a nod to modern day, email. But the industry appears to be moving slowly toward the digital age.

Ad giant Interpublic Group of Cos IPG -0.44% . is teaming up with TV and radio companies, including A&E Networks, Clear Channel, Tribune Co. TRBAA -0.96% andCablevision Systems Corp., CVC -3.36% to build and test an automated ad-buying system for television and radio ads, the companies say.Others, such as NBCUniversal, are in discussions with the group but haven’t yet agreed to join.

The system, which Interpublic says could be operational within six months, comes as television faces growing competition from online media, where automated systems have long been used for search ads and increasingly online display. Executives on both the buying and selling side of advertising say that automated systems make it possible for advertisers to use data about consumer habits to better target their ads at the people they want to reach.

“There is so much intelligence and data out there, we have to capitalize on that and it cannot be restricted to digital media,” said Matt Seiler, chief executive of IPG Mediabrands, the Interpublic division building the system. “Digital has paved the way for the reinvention of the rest of the media,” he added.

Having an automated system that can allow for more data to be used in media buying in traditional media will put traditional “media companies on a level playing field” with the digital media outlets, said Mel Berning, president of ad sales at A&E Networks.

Advertisers have been complaining for years about television’s antiquated ad-sales methods, which involve media buyers sending spread sheets back and forth to media companies as they figure out orders they want to place for ad time on different TV shows. Not only do they see it as inefficient, the process makes it hard for marketers to get visibility about ad prices being paid across the industry.

“The process of choosing and placing television advertising is labor intensive, very complicated, expensive, and challenging and not very user friendly,” said Tad Smith, Cablevision’s president of local media. “It’s truly brutal,” he added.

Executives involved in the IPG plan say a more automated system will allow a media buyer to go into a computer system to see what inventory each TV or radio outlet has available and select the best ad placements based on data that the ad buyer has on its customers and their media habits.

There is no guarantee the new system will succeed. In 2006, nine big advertisers joined forces to build an online auction site for buying TV ads with the help of eBay Inc. But that venture fizzled after most TV networks refused to participate.

Media outlets have resisted automation largely out of concerns it would drive down ad prices, which has occurred with the introduction of automated systems in online display.

“The number one concern with TV executives has been pricing,” said Jim Nail, an analyst with research firm Forrester.

But industry executives say that with the right targeting, ad time could become more valuable, eliminating some of the waste that occurs in TV ads now and offsetting any downward pressure on ad prices.

“We can go from buying TV ads that reach women 18 to 49 to buying ads that reach women who buy makeup from a particular cosmetics company,” said Kristi Argyilan, president of Magna Global’s North America business, a division of Interpublic.

Moreover, IPG Mediabrands isn’t designing the system to be an auction: instead media companies will control how much their ads sell for, limiting the potential for the system to drive down prices.

“If you have the right targeting and the right data then I think you can drive yield and this doesn’t have to be a race to the bottom,” said Tim Castelli, president of national sales and marketing at Clear Channel Media and Entertainment, a division of CC Media Holdings Inc.

The companies participating in Interpublic’s test account for a minority of $66 billion that eMarketer expects to be spent on U.S. TV ads this year. But Mediabrands is working to lure more media companies, such as NBCUniversal.

“As this initiative matures, NBCUniversal certainly would like to support it as much as we can, where it make senses for our business,” said Linda Yaccarino, ad chief at Comcast Corp.’s NBCUniversal

Interpublic, the fourth biggest ad holding company, buys roughly $36 billion in ad time annually across the globe on behalf of marketers such as Johnson & Johnson, Chrysler Group LLC and Sony Corp. Roughly 65% of the money goes to TV and radio ads.

Mr. Seiler at IPG Mediabrands said he expects to have at least 50% of IPG’s clients buying done in an automated fashion by 2016. IPG Mediabrands said it is building the platform with the help of several technology companies including Adap.tv, which earlier this month agreed to be bought by AOL Inc.

Over the past year, there have been other signs that automation is beginning to creep into the traditional media business. For example, Visible World Inc., a New York ad technology company, rolled out an automated buying system earlier this year that has access to some inventory from cable operators and small cable networks. IPG Mediabrands has used the system for several ad campaigns.

While Interpublic’s new system will be used for its clients, other ad holding companies are likely to build systems to bring more automation to traditional media ad sales.

Ad executives said the trend will continue to accelerate as marketers are beginning to buy online video ads using such systems.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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