Google’s new ad deal with Cox Media, in which the cable network will contribute unsold ad inventory to a “national inventory pool” offered by Google, looks like a model for killing the broadcast TV business as we know it.
The deal expands Google TV Ads to 42 million households via Dish Network, DirecTV, Verizon FiOS, and Viamedia, which have previously done deals with Google.
TV, particularly network TV, is currently organised like a cartel: ABC, NBC, CBS and Fox all control large audiences that advertisers want. They tacitly cooperate to keep prices high by requiring advertisers to bid for their airtime in a restricted narrow window called the “upfront” market, which happens annually in May.
Advertisers who don’t lock in bulk deals at that time find themselves relegated to the “scatter” market for the rest of the year, which the networks have a habit of holding back from sale for as long as possible in order to keep prices high.
Deals are made between handfuls of ad agency buying execs in New York and their sales counterparts at the networks face-to-face, on the phone or even — in this day and age! – via fax.
The result is that even though broadcast TV audiences have gotten smaller over the years, prices for airtime have only gone up — another symptom of market cooperation.
If the TV ad market were organised logically, it would be in an online, real-time airtime auction in which advertisers could bid on prices and drive them as high or as low as the market will bear. It’s happened in the hotel business, the airline business, the book business — you name it. But not the TV business.
In fact, a few companies have attempted to persuade networks to make their airtime available on exchanges where it can be bought and sold electronically, and they have all met resistance or lack of cooperation from the networks. NBC most recently declined to cooperate with Google in October.
Here’s what Google says it is doing now:
Google TV Ads is announcing an update to its service that enables operators to easily opt-in and contribute these narrow slices [of unsold ads] into the Google TV Ads national inventory pool. As thousands of these slices are aggregated, this pool represents a large national audience that marketers can then customise to their audience goals.
Cox is the first major cable operator to choose this new Google TV Ads ad management solution, and moving forward we will be integrating with new partners, including Suddenlink Communications, which reaches 1.2M households.
As Google TV Ads already allows advertisers to buy airtime and upload ads to the network without the need for a Madison Avenue media agency to take a commission to place the ad, the Cox deal and Google’s new inventory pool could be the beginning of yet another attempt to create an online market exchange for ad time.
Put together Google’s new online market for TV ads and the national trend toward not watching TV, and it’s hard to see a rosy future for the broadcast networks.
Here’s Google’s progress: