Hot Off Internet’s Auction Block: Billboard Space
Online auctions are working for people hawking computers, sports memorabilia and even Beanie Babies on the Internet.
Now some ad brokers are setting up electronic auction markets to sell their hottest commodities: outdoor billboards.
Adauction.com, a San Francisco start-up that specializes in selling Internet ads, raised eyebrows two months ago when it auctioned some Bay Area billboards for up to $50,000 a month--about 50% more than the already high prevailing rates. Since that sale, some of the nation’s biggest billboard companies, including Eller Media of Phoenix, have said they are ramping up to sell some of their own billboards online.
Some question whether auctions can work in an industry in which business is still done with a handshake. But others say there are distinct advantages to selling billboard space by auction.
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For buyers, it means getting a chance to secure space once reserved for advertisers who enjoyed special relationships with billboard brokers. For sellers, it means fetching the top price--the price the market will bear--as a larger pool of advertisers bids for a limited commodity.
“This is a classic example where if you widen the market and create a meeting place for buyers and sellers, everyone would be better off,” said Mark A. Zupan, dean of the University of Arizona College of Business and Public Administration.
That was what Adauction discovered in July when it placed on the auction block a 20-by-60-foot billboard near the San Francisco airport. It was the first online auction of a billboard.
Bidding started at about $35,000 a month. Over a two-day period, dozens of advertisers clicked furiously for rights to the billboard. Sources said CNet.com paid $75,000 for the two-month period ending in September and that online brokerage E-Trade contracted for the same billboard for the next three months. Its winning bid: $155,000.
Adauction officials wouldn’t talk about the prices beyond saying that the winners paid an average of 35% more than the prevailing rate.
Auction markets seem tailor-made for the booming outdoor advertising business, in which a growing number of advertisers is competing for scarce billboard space. In Silicon Valley, high-tech companies fight for any outdoor ad space along the 48-mile stretch of Highway 101, which connects San Francisco to San Jose. The firms say they need these spaces to appeal to venture capitalists and potential customers, and even to taunt competitors among the 200,000 drivers stuck in rush hour traffic twice a day.
E-Trade’s billboard urges commuters to “Put the Power Back Into Your Own Hands”; CNet’s proclaims, “Technology Expert Available 24/7.” Another screams: “Yahoo! A nice place to stay on the Internet.”
Chris Redlitz, founder and chief executive of Adauction, says billboards are in high demand because they represent the last fragmented medium. At home, TV, radio, newspapers, magazines and the Internet compete for consumers’ attention--and are geared toward different demographics. As Americans spend more time than ever in their cars, companies want to take advantage of that captive audience.
At the same time, the availability of billboards is more limited than, say, banner ads on the Internet. Many cities and states ban billboards alongside thoroughfares to eliminate roadside eyesores.
Consequently, so-called out-of-home advertising, which includes bus and stadium ads, this year is expected to gross nearly $5 billion, a 10% increase from 1998, according to the Outdoor Advertising Assn. of America, a Washington-based trade group.
Adauction, which has received $30 million in venture capital investments in its two years of operation, initially focused on auctioning “remnant” ad space on the World Wide Web. Since then, the company has also sold print ads and plans to auction radio and television ads by year’s end.
“We want to be a one-stop shop for all media buys,” Redlitz said.
To be sure, ad brokers aren’t the only businesses exploiting the Web to reach other businesses. Manheim Auctions, which auctions used cars to dealers around the country over the Net, handled $1 billion worth of sales last year. And stock-market-like exchanges have popped up to handle worldwide trade in paper products, chemicals, steel and even food.
Brian Kennedy, owner of Los Angeles-based Regency Outdoor Advertising, which owns about 400 billboards in California, said the auction system will benefit smaller operators who cannot compete with the sales force of the larger billboard firms.
“It’s going to level the playing field,” Kennedy said. “Their sales force may no longer be able to steamroll us, because all we need to do is put our inventory on the Internet.”
But titans of the billboard industry also plan to seize that opportunity.
Karl Eller, founder of Eller Media, which last year generated nearly $900 million in revenue, said he plans to sell a few billboards on Eller’s Web site later this year. He’s being cautious because he doesn’t want to lose the goodwill of his customers, many of whom prefer private deals.
“We don’t know how our loyal customers are going to react when they hear that we plan to open the process,” Eller said. “That’s the big question mark. Some of them may come to us and say ‘We want first shot at that sign.’ That could create a problem.”
Not everyone is convinced that the auction market will work.
Tom Teepell, vice president of Lamar Advertising, a Baton Rouge, La., firm with $400 million in annual sales, said his company has talked about selling billboards on the Internet but that for now, it plans to do business the old-fashioned way.
“It a question of loyalty,” Teepell said. “It would be wrong for me not to go to our best customers and say, ‘Here’s what is available, and you have the right of first refusal.’ We’re not selling computers or calculators. We built our business on relationships.”
