By the time you read this, the news will probably be wrapping fish in most media buyers’ and planners’ kitchens.

Excite@Home Network is, as many of you already know, preparing to begin selling keyword and channel inventory for the next year. They are going to be selling this inventory on a bid basis.

Agencies and clients are being asked to submit requests for the inventory that they either have an interest in but don’t own, or inventory that they may have owned all year long, but are now seeing those contracts expire.

Accompanying the submitted request should be the price that the advertiser is willing to pay for that inventory. Upon review of this first round of closed bid submissions, a second round will begin. Only this time, it will be an open auction format where the starting bids will be at the high established during the initial round of closed biding.

Nope. It’s not Christie’s, government construction contracts, or even AdAuction. It is Excite, and it may be the future for big brand site ad pricing.

The auction model has long been a means by which those unsure of the market value for products and services can find that value. It is also a way to separate the wheat from the chaff when it comes to desire for inventory.

Those with the greatest means and the strongest will come out on top of this particular game of SnapDragon.

“Actually, for them, I think it is a better strategy for getting more money from keywords than the Yahoo rate increase,” said David L. Smith, President of Mediasmith.

According to Excite, the “process will enable Excite to make sure that advertisers get a fair chance to obtain inventory for next year.” (That’s a Northwest sales team memo.) Actually, I agree. All of God’s children are equal under the eyes of the auctioneer.

However, this means no more right of first refusal. And those advertisers with the deepest pockets will set the new floor for search engine ad inventory. It’s going to turn the advertising world on its head.

Decades of media buying tradition are out the window with the dissolution of the ROFR.

For many years in traditional media, advertisers willing to commit long-term relationships with media have been grandfathered into new contracts and deals year after year. What this is like is getting rid of rent control laws in big cities, putting rents on the open market.

Or, what AdAuction has done to outdoor on the Highway 101 corridor from San Francisco to San Jose. Billboards that used to go for $25-$30K per month now will go for $50K.

If you are a through-and-through free market capitalist, this is all fine and good: The market is doing what it’s supposed to in setting rates. But, then, so did the tulip frenzy of 1634-1637.

During the period 1634-1637, people were abandoning jobs, businesses, wives, homes and lovers to become tulip growers. For one particular tulip bulb variety, the Vice-Roi, one Dutchman is reported to have paid thirty-six bushels of wheat, seventy-two of rice, four oxen, twelve sheep, eight pigs, two barrels of wine and four of beer, two tons of butter, a thousands pounds of cheese, a bed, clothes, and a silver cup.

The mania soon became fanaticism. Another account has a certain man who had paid for a bulb its weight in gold, purchasing the same variety from a cobbler for 15,000 florin, and right before the cobbler’s eyes, crushing the bulb he had just purchased beneath his boot to ensure that now he was the only person possessing that particular variety.

Does any of this sound familiar? Ever hear stories from the Gold Rush? I’ve seen the same thing happen with the scramble for portal deals. And now this.

Though value has always been primarily a function of psychology, so too, were the Crusades, bellbottoms, and Tickle Me Elmo.

But the end of tradition and fundamentals isn’t all that’s at risk here. True, the move away from sensible foundations has done amazing things for the stock market. But this method of selling negates the “relationship” factor that the advertising business, or any business for that matter, has been built on.

It won’t matter who is at the table or on which side. The buying and selling process is now plug and play, an “insert here” mechanism that extracts personality. Sure, it might defeat cronyism, but the egalitarian posture is one of dollar democracy.

What to do about all of this? Excite wanted bids in by September 21st. But that is a loose deadline. I suggest the following:

  • Submit requests for inventory your clients currently own.
  • Bid the same CPM you are currently paying. If this ends up not being high enough, don’t worry, there’s always the next round. But there’s no reason to make it easier on Excite to make it cost you more.
  • Don’t worry about those with clients who have sponsorship deals. Those are good for the terms of the contract, and the inventory that falls under it is protected. But be mindful of what’s going on. Hopefully relationships aren’t dead yet and you’ve got a good one with your Excite rep. Contact him/her regularly and ask to be kept in the loop on whether or not there have been inquiries for your inventory.

And that is really all you can do. Welcome to this brave new world.

“So it goes.”

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