Also, Google is ramping up its efforts in anticipation of launching an audio ad product later this year.
Bid4Spots, a two-year-old company that has been holding online auctions for remnant ad space on terrestrial radio for more than a year, is expanding its network to include independent online-only radio.
"We're creating an entirely new marketplace for a huge group of broadcasters and advertisers who want an easy and profitable way to do business with each other," said Dave Newmark, Bid4Spots CEO. The first auctions for online inventory will take place in January.
The company has held weekly auctions for unsold inventory on more than 2,300 radio stations in the U.S. It uses a "reverse auction" format, where advertisers set a maximum CPM bid they are willing to pay, and the media owners compete for advertiser money, bidding down the price of available inventory until an advertiser accepts their bid.
For the online radio network, Bid4Spots teamed with Spacial Audio Solutions, a software and service provider for online broadcasters. The system will use Spacial's StreamAdz platform to schedule, track, and manage the advertising.
The potential size of the independent Internet radio advertising market has been estimated at $500 million. An Arbitron/Edison Media Research study reports that 52 million Americans listened to Internet radio over a one-month period earlier this year. About 42 million of those listeners listen to independent broadcasts, a fragmented marketplace of more than 25,000 broadcasters.
"Independent broadcasters are motivated by passion for their formats, rather than by profit. But most would love to serve ads and make some money if they could find a way to make it work," said Rockie Thomas, business development manager for Bid4Spots and the former director of sales and marketing for Spacial Audio.
Bid4Spots will soon face competition for its online auction for radio ad space from Google, which acquired dMarc Broadcasting, a competitor to Bid4Spots, in January. Google is ramping up its efforts in anticipation of launching an audio ad product later this year.
The company is currently hiring radio ad sales people in several major markets in the U.S., according to a spokesperson, and is reportedly in talks with large radio networks like ClearChannel to buy up to a billion dollars of ad inventory.
The reverse auction model works for radio stations, since any space not sold by the end of the week before it airs would otherwise go unsold. The stations can decrease the cost of ad space at their own pace, and can end the auction at will, so regular advertisers are less tempted to bypass regular contracts to see if they can get a better deal on auctioned ad space. It also keeps the final terms of the remnant sale confidential.
Advertisers are able to pick up radio spots at a discount, and not commit to long-term ad buys. They can also maintain a level of control over audience quality.
An auction model for TV ad space is in the works by eBay and a consortium of advertisers that includes Walmart, HP, Microsoft. The group is currently working on a reverse auction system to sell national cable TV spots, Howard Rosenberg, director of private marketplaces at eBay, said this week at the Ad:tech conference in New York. That marketplace may serve as a clearinghouse for remnant space, or something more, he said.
"The market is going to determine where the marketplace goes, and what type of inventory gets traction there," Rosenberg said. "It's hard to create a marketplace and say 'this is what you will trade'. We'll create the marketplace and let users find the best way to use it."
While some industry watchers have predicted auctions could signal the end of the upfront, and other ways of selling old media, Rosenberg said that's not the case.
"That's like saying eBay Motors will hasten the demise of the [auto] dealership. That's not what we're doing here," he said. "It's an adjunct, another way to reach an audience you weren't reaching."
Still, traditional media sellers feel threatened by the idea, because they currently hold the power and see an auction as a threat. Rosenberg said that those fears are natural, but they also tend to dissipate when eBay explains what it is they're doing.
"This is a significant initiative to change a lot of behaviors. Any time you do that it's difficult and slow," he said. "The business of offline advertising buying and selling is due to start moving forward."
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