Why Can't Internet Ads Be Sold like TV Commercials?

Three years ago, Elizabeth Blair and Andy Atherton were executives at Yahoo, working to move billions of dollars’ worth of online advertising inventory, when they noticed a mismatch between how digital businesses were selling and how major brands go about buying.

Web portals and online media companies were swimming in excess ad space, with buyers exploiting the spot market to get last-minute deals. Meanwhile, back in the world of old media, things were different. Every spring, the TV networks held the “upfronts,” part of a glitzy in-person marketplace where envoys from car makers, banks, and beverage giants could see glimpses of the upcoming fall shows and reserve tens of billions of dollars’ worth of airtime in one fell swoop. For sure, it was an old model, but every year, it worked.

“These [big brand] companies are used to spending a big block of money a few months in advance of a campaign and then only knowing if it worked a few months after it is done,” says Atherton. The key to selling TV advertising well in advance is that there’s only a limited supply of ad space. “The conventional online advertising market can’t offer that,” he adds.

Still, Blair and Atherton wondered whether they could create something similar for the digital world. By January 2008, the pair had quit Yahoo, secured $3 million in venture capital, and opened the doors of Brand.net. Blair, the CEO, said they were responding to a do-or-die situation. If digital publishers can’t make their business model work, she told Advertising Age, “they’re not going to be able to stay in business, and that’s bad for the Internet.”

Brand.net’s product, the Media Futures Platform, makes it possible for firms to buy online advertising months or even a year ahead of time. The company offers spots only on high-traffic, high-quality sites, and it guarantees how many people, and what demographic, will see those ads. The idea was compelling enough to attract advertising giants such as Unilever and Wal-Mart–plus an additional $24 million of funding.

Brand.net relies on in-house technology that crunches data on the pricing, availability, and performance of online ad slots to predict where prices for various types of ads will be on future dates. Once a price quote has been generated and a customer has accepted it, Brand.net reps contact the website publishers holding the ad inventory and buy it up on behalf of the client. After that, more algorithms track the performance of the ads from different customers and juggle Brand.net’s inventory to ensure that the advertiser gets the promised audience.

Last month, Brand.net released a software package called Media Futures Platform on Demand, which gives its customers direct access to its key technology. Not only can brands purchase upfront campaigns with a few clicks, but they can also use the price predictions to gain market intelligence that helps them negotiate with other ad vendors. That’s welcome because the near-infinite supply of online advertising inventory upends traditional supply and demand, says Carl Fremont, global media director for Digitas, which partnered with Brand.net on the product. “This makes it possible for our clients–the brands–to rely on more than just the subjective opinion of different publishers on pricing,” he says.

In addition to being able to plan further ahead, brands are assured of well-placed ads, because the firm uses space only on sites that ComScore rates among the top 50 in subject channels such as entertainment, news, or health and beauty. Companies are also assured that their ad won’t appear alongside porn or other objectionable content. Filtering technology scans every page every few minutes; if so much as a ribald user comment appears, the ads are quickly replaced by a public-service announcement. “This is tremendously important to these brands, some of whom were just staying away from online,” says Atherton, the COO. “It makes online media as trustworthy as network TV, where you know there isn’t anything nasty because of the FCC.”

Brand.net has been able to attract eight of the top 10 packaged-goods brands and three of the five largest big-box retailers. It’s had additional help from another quarter that recalls the old TV business model: research from the A. C. Nielsen Company. In this case, the research is based on a panel of 75,000 households whose members agree to scan all the products they purchase and have their Web use monitored. Atherton cites eight studies demonstrating that advertising the Brand.net way yields an average 300 percent return on money invested. “Nielsen’s long-term average over more than 200 similar studies is around half that,” he says.

The big question is whether such evidence will correct a striking anomaly in the marketing world: many consumers are now spending most of their media time in the digital realm, but large brands are typically spending less than 5 percent of their ad budgets there. Blair and Atherton are betting that those budgets will have to move to where the action is.