Advertising Exchanges And Auctions Are Missing The Mark

By Caroline Oberg, Computer World |  Business

The idea of bringing e-commerce to the advertising industry isn't a new one. This idea, commonly referred to as
ad-commerce, has been around since 1995, when the industry's various governing bodies began to publicly ponder how the Internet could make the extremely inefficient, error-prone and mistake-ridden process of buying advertising more efficient. Since that time, the industry has seen the birth (and, more recently, the death) of dozens of start-up companies dedicated to making

ad-commerce a reality.

Much to the chagrin of the entrepreneurs, industry players and venture capitalists behind these start-ups, attempts to revolutionize this technologically antiquated industry have met with great skepticism and reluctance from the advertising community. The industry's reluctance to adopt the so-called solutions it has been offered is forcing many of the ad-commerce upstarts to throw up their arms in frustration and close their doors. Some, more persistent players have found themselves willing to carry on the fight but have found themselves without a paddle as their venture backers, unimpressed by the industry's reluctance to embrace
ad-commerce, have withdrawn their financial support.

With so much attention and so many capable, well-funded entrepreneurs focused on tackling the challenges of ad-commerce, why have so many start-ups in this industry found themselves out of time and money and closing their doors? Why has no single player risen to the forefront and established a platform or standard for e-commerce in the advertising world?

The answer has more to do with what these companies are trying to solve than how they're going about solving it. Like many traditionally noncommodity industries with middlemen and brokers, advertising is priced and sold in ways that make e-commerce "exchange" operators cringe. As a result, nearly every ad-commerce start-up to date has come to market with a strategy of changing the way the industry prices its inventory. From auctions to reverse auctions to one-rate inventory pooling plans, these companies have followed the lead of such B2C pioneers of pricing efficiency as Priceline and eBay. Much to the surprise of the industry outsiders behind these ideas, the industry has yet to bite.

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