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Adauction Targets Unsold Banner Space

Online banner advertising has been taking it on the chin of late, what with click-through rates falling below half a percent and the increasing use of browser plug-ins that block ads from appearing on surfers' screens at all. And despite prognostications from Jupiter Communications that online advertising will hit $11.5 billion by 2003, the sad reality is that something like 60 % of all online advertising inventory goes unsold, this according to Jim Nail, Senior Analyst with Forrester Research.

This glut of unsold page views caught the attention of Chris Redlitz and Dave Wamsley in 1997 -- just about the time that online auctions were starting to take off -- so they dreamed up Adauction.com which held its first online auction in February 1998.

Since then, the site -- which handles legacy media ad sales as well as online -- has registered more than 4,000 media buyers including those from such well-known companies as Modem Media-Poppe Tyson, USWeb/CKS, Foote, Cone & Belding and Goodby Silverstein. Those buyers have their choice of a wide range of media outlets from Yahoo! (YHOO) and Ask Jeeves (ASKJ) to PCWorld and Link Exchange.

Adauction.com takes a percentage of every sale: generally 35% of online and 10 to 35% of legacy media. Adauction.com won't talk about the total number of pages or page views sold, so it is difficult to assess their overall impact on the glut.

In general, Adauction.com looks to represent sites that have at least 1 million monthly page views from more than 100,000 unique visitors. Smaller traffic is allowable from sites with unique target audiences. There is no minimum purchase for buyers.

"I think they are going to do very well," said Forrester's Jim Nail, "Especially because they are going after the offline stuff as well."

In addition, Adauction.com has amassed a $29.2 million war chest in four rounds, the most recent of which was a $20 million tranche this June. Investors include Amerindo Investment Advisors, Convergence Partners, Geneva Partners, Lehman Partners, New Millennium Partners and Viventures.

They'll need the money because upstart AdOutlet.Com is closing quickly on them. Launched just this June, AdOutlet.Com now claims 3,000 media buyers and ads from a blue-chip online and legacy media list that includes CBS, ESPN, Fox News, Lycos, Sports Illustrated, PC Computing, PC Week, InfoWorld, Forbes, and Tunes.Com. AdOutlet.Com also offers a quick and completely online registration process which allows buyers to start making bids immediately. AdAuction.com, on the other hand, relies on a kludgy system that requires online registration followed by a follow-up call before bids can be placed. VC Watch still had not received that follow-up call more than a week after registering.

The retro-awkward nature of Adauction.com's registration process, its lack of timely follow-up, and the almost instant parity that AdOutlet.Com has achieved means that the first mover advantage in this competition is in danger of being fumbled and must be consolidated if they expect to maintain their premier market position.


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