Ad Buying Moves from Madison Ave to Wall St

There once was a day when a tired sales force spent hours haggling on the phone with ad buyers, trying to dump their leftover inventory off at prices that justified their labor hours. No longer.

There are markets for everything, and they are becoming increasingly technical and efficient. There are now several exchanges where ad buyers bid on remnant ad space (excess inventory that was unable to be sold at a premium price), and create a market around the specific spot. These spots' prices are grossly reduced (a typical ad selling at $20 per 1,000 impressions may go for $1 per 1,000 on the exchange, discounted for reduced demand levels and more headache involved), and the volume is growing (about 6B transactions per day).

Some advertising research firms are setting up complex trading algorithms to profit on the open market, by exploiting arbitrage opportunities just like in normal equities markets. There is hope of the market evolving to demonstrate more similarity to exchanges such as the Nasdaq or NYSE, including secondary markets, options, futures, and derivatives. In 2007, about 15% of remnant ad space, and about 5% of overall ad space, was sold over the exchanges, so it seems as though we're well on our way.

The endgame is obviously a more sophisticated and useful market for ads in general, applying, theoretically, a fair market price to each spot.

Check out the full article here, and the largest exchange, the Adsdaq, here.