Media Forum: Will Olympic auction work?

Outdoor inventory is being sold to sponsors online/

At last - we're seeing some significant media inventory being traded in an online auction. On Monday, sites reserved under rules devised by the London Organising Committee of the Olympic Games to protect the interests of official Games sponsors went on sale to the said sponsors on a special website created by Media Equals.

The premium opportunities have sixand seven-figure reserve prices and will go to the highest bidders - though later stages of the auction, involving inventory farther away from prime locations, such as stadiums and transport hubs, will involve price caps.

But you could easily argue that this is a landmark moment. For more than two decades, in fact, since the Big Bang that transformed modes of exchange in the City, far-sighted visionaries in the media marketplace have been telling us that online auctions will inevitably come to dominate trading in the media marketplace.

And yet, though prospective platforms have come and gone, this train, to use an ill-thought-out and unconvincing transport metaphor, has remained resolutely in the station. Even Google, which trades the classified advertising it calls search using a form of auction, has yet to convince the wider market to entirely abandon bespoke sales.

There are obvious reasons why some media owners should fear the widespread commoditisation of their inventory, of course. What they might grow to like, however, is the potential savings that online trading might deliver.

So the market as a whole will be watching the 2012 Olympic outdoor media auction with interest. Yes, the circumstances are exceptional - and that might mean we'll see overheated bidding for some of the more desirable inventory.

Everyone, though, will be curious to see, at a more fundamental level, if the system actually works to everyone's satisfaction. And whether advertisers emerge happy with the value it has delivered for them.

One thing is sure, Roy Jeans, the IPM chief executive, asserts - this is, in itself, quite an exciting business. He says: "I think for just about everyone involved, this will be the first time they've taken part in this sort of auction. Will it deliver value? We and our Olympic sponsor advertisers only pay what we think an opportunity is worth. But, of course, the interesting thing is that each of the sponsors have a slightly different agenda."

Spencer Berwin, the managing director, sales, at JCDecaux, points out that the system was devised following a thorough process of consultation across the industry. He says: "This auction arises out of the bid process by which London won the Games and it's there to give sponsors first dibs on key outdoor products, to regulate prices, protect sponsors from guerrilla marketing and provide a fair trading platform. I think it will deliver." And he's keen to add: "What we would like to emphasise is there is plenty of outdoor product not included and that outdoor is very much open for business outside of this process."

Meanwhile, Glen Wilson, the managing director of Posterscope, is confident that the process is delivering value for advertisers - especially those with a well-informed and clear strategy.

He explains: "In terms of value, there are specific locations and environments where cost will be mainly dictated by scarcity versus demand." The example he cites is the opportunity for an advertiser to dominate a station like St Pancras. "Arguably, that will never be as valuable as it is during the Games, in that St Pancras is one of the primary transport gateways to Stratford," he reasons.

And Gideon Adey, the business development director at Kinetic, argues that an auction is the best way to accommodate demand for what will be some very desirable inventory come 2012.

And he's sure that the process will deliver pricing in line with expectations. It is projected that 11.4 million people will visit an Olympic venue during the Games and there will be an extra eight million people in London - so it was reasonable to expect market rates to increase during this period. The picture is further complicated by the fact that TV advertising prices are expected to rise due to lower commercial viewing figures, with audiences staying glued to BBC coverage of the Games.

Adey concludes: "Combine these issues with our own research findings that 45 per cent of the people who are planning to visit the Games say they will also visit other attractions while in London, and it appears that the sponsors are being offered good value for reaching broadcast audiences."

YES - Roy Jeans, chief executive, IPM

"It has been a well-signposted process. I don't think it can have been done better. Locog has done a great job in balancing the requirements of all the interested parties. I think everyone will learn something."

YES - Spencer Berwin, MD, sales, JCDecaux

"The mechanism was devised by Locog and the International Olympic Committee on behalf of sponsors and they have had every opportunity to put their views forward. I believe the mechanism that was arrived at is a good one. The process will deliver."

YES - Glen Wilson, MD, Posterscope

"It's important to work closely with client and agency partners to devise appropriate trading strategies. We and our partners were certainly rigorously prepared and well-rehearsed, having carried out several real-time tests using the auction platform."

YES - Gideon Adey, business development director, Kinetic

"An auction is the fairest way to sell - because it finds the natural market value of a product. Since demand directly dictates price, if a reserve price is greater than the demand for a site, it will not sell."

- Got a view? E-mail us at campaign@haymarket.com

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