Bid4Spots Helps eBay Enter the Radio Game

Summary

EBay announced today that it will begin working with radio ad start-up Bid4Spots. The deal will bring Bid4Spots’ auction-based radio ad sales capability to eBay’s Media Marketplace. This represents a growing direction for eBay to broker ads to cable television and radio and brings the online giant in head-to-head competition with Google’s parallel efforts to broker ads in these media. At stake is the $20 billion U.S. radio advertising business.

Analysis

Bid4Spots’ flagship is a reverse auction technology that provides a self-service dashboard for advertisers to choose a price ceiling for existing audio ads, as well as target demographics geographies, and radio stations (much like Spot Runner‘s self-serve dashboard for buying cable television spots).

The reverse auction part comes in when radio stations bid down on those preset price ceilings (see demo here). Bid4Spots has mostly marketed this as an efficient way to sell remnant inventory, analogous to what Yahoo!-owned Right Media has done with considerable success in online display ad markets.

This auction-based system has clear opportunities for eBay, is in line with the company’s existing paradigm and fits the expectations and proclivities of its existing advertisers (eBay sellers). This will expand eBay’s suite of products to the small-business market to which it largely caters.

For Bid4Spots, eBay could conversely provide a single point of entry into many small-business advertisers, possibly interested in radio ads. This is potentially a sizable advantage given the fragmented nature of the small-business market segment, and the challenge in selling into it with a self-service product (a challenge that is central to most local online advertising).

Add to this the inertia in the SME marketplace, where many businesses have been trained to think that radio advertising is cost prohibitive for them (traditionally it has been). A partnership with eBay should help Bid4Spots alleviate some of these challenges and raise its profile, as well as the general message that radio advertising can be a viable and attractive medium for lots of small businesses.

“Our challenge to making this possible for small businesses nationwide was just made quite a bit smaller with today’s announcement,” says Bid4Spots CEO Dave Newmark.

EBay’s ability to bring radio stations to the table should also be valuable and will likewise increase the level of participation and thus value and attractiveness of the auctions themselves. Through the deal, eBay will let more than 2,300 radio stations auction off airtime through its new online Media Marketplace, in which it will share revenues with Bid4Spots.

“They have built a Media Marketplace that currently serves only one media – national cable TV,” says Newmark. “I cannot speak for them, but my sense is that they felt that radio was a logical step, especially since many of the businesses with whom they do business also do business outside of eBay and would appreciate a media vehicle like radio.”

The Online Sales Channel: A New Radio Opportunity

With media fragmentation and emerging online ad media, it has become a buyers market for radio ads, which is why many radio station groups including Clear Channel (see Google partnership) have embraced the online sales channel.

Mostly, these deals have been to offload remnant inventory, and station groups will likely be careful not to let such products undercut or devalue their own premium ad sales efforts. Newmark, however, doesn’t see much of a conflict here but rather perceives an opportunity for additive revenues for radio stations.

“We like the ‘vertical’ of being in the last-minute segment across various types of radio,” he says, “helping stations monetize that portion of their inventory that was heretofore not monetized, mostly for fear of training their advertisers to wait for fire sale rates.”

 

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