12th
eBay’s ad marketplace
eBay’s closing of a marketplace for TV and radio ads has been reported pretty widely in the last day or so. First, let me be clear: though I’m an eBay employee, I wasn’t involved with this initiative, and I don’t have any real inside information about it, so my opinions are basically those of an outsider.
Reading some of the reports, however - and this one in particular - reminded me of a post I wrote a few weeks ago, where I talked about a particular “rule” that I’ve used several times while evaluating businesses, which, in rough, simple terms, says: if your business disrupts a process, and the people who decide whether to use your disruptive offering have vested interests in maintaining the status quo, you’ve got a tough road ahead of you.
This sounds really, really obvious, but I’ve seen a lot of startups (and worked for one) that nevertheless try to bang their head against this kind of brick wall. In particular, it’s easy to confuse one’s customer with the “people who decide”, when they’re often not the same person. (Hell, they may not be in the same company.) At my former company, our “customer” - who signed the partnership contract - would be some SVP. The “person who decided” was someone several levels down who actually controlled where the excess inventory was stored, shipped, and sold. … and, in practice, it was virtually impossible to get that person to break his cozy relationships with shady brokers who kept his golf game sharp and his pockets full of tickets to his favorite sport.
I’m not an expert, but offline advertising strikes me as an industry where there’s an entrenched value chain of companies and (more importantly) individuals who really aren’t eager to make a marketplace efficient, when “efficiency” = “cutting me out of the process”. The poster referenced above says “ad agencies (media planners, creators and buyers) [aren’t likely to] give up their role as gatekeeper to a global $500B marketplace, off which they generate a 15% cut (so roughly $75B per annum)”.
In other words, the chance of success for this TV/radio ad marketplace was slim from the start. Now, as an economist, I believe pretty strongly that markets will trend toward efficient solutions over time. In cases like this, though, that timescale can be pretty long, and there can be a lot of bodies along the way, as the existing value chain participants fight to preserve their positions.
