We may never know exactly what was said during the DOmedia / Jack Sullivan, Starcom Mediavest Group (SMG) breakfast held during the time of the DPAA Media summit in NYC a few weeks ago but WE have a pretty good idea of what went on beforehand and last week we saw some of the (delayed) reaction to events that have been unfolding (dare we say ‘brewing’) for a few months now…
- Respected journalist Katy Bachman didn’t quite dish the dirt but her headline ‘Big OOH Companies Reject DOmedia‘ (in her 11th November MediaWeek article) was certainly hard-hitting
- Several other people, including Dave Haynes over on Sixteen:Nine picked up the story ‘Squabble developing over big agency DOOH transaction fees‘
- But even before Katy had written anything, our good friend Ken Goldberg over on his blog wrote “but gee whiz, no one else (including DPAA members) finds it worthy of comment that there may possibly be an issue of conflicting interest here?” in referring to part of the squabble, which is the DPAA’s selection of Ayuda Media Systems’ online planning tool (just to throw some gasoline on the fire, Ayuda has subsequently announced a free planning and buying tool called Symphony)
Even though Ken was first to write on the subject he does the best job of summarising much of the squabble, we quote (Ken) when he says “This represents an escalation of the planning tool wars that are in full swing: Entourage has linked with the IPG Media Lab; DOmedia is rumored to have inked an exclusive deal for its platform with StarCom; rVue has linked with over 150 agencies/buyers and about 100 networks (disclosure: RDM integrates with rVue)”.
Katy’s opening line was “The nation’s biggest out-of-home media companies are refusing to list and sell their inventory in Starcom’s new out-of-home database planning and buying system created by DOmedia. It’s not only the big traditional outdoor companies that are pushing back, but also some of the largest place-based out-of-home media companies”
She added “The rub is DOmedia’s 2 percent to 5 percent transaction fee tacked on to sales made through the system, a fee the media companies find unpalatable”.
We’ve been researching this since before breakfast*. Unfortunately not one of the dozen or so people we have spoken to over the last few weeks wanted to ‘go on the record’ and be quoted but anyhow let’s go back a while, re-cap and see how we got to this situation…
- DOmedia approached every major network
- DOmedia proposed fees in the range of 2% – 5%
- What’s more, some networks were quoted exactly 2% and some were quoted more – some were even quoted less than 2% (that’s crazy don’t these people at DOmedia know that everyone talks to everyone in this industry)
- DOmedia suggested that it too would accept advertising
- (The end result was) Every major network said no
It was only when everyone said ‘no’ that DOmedia approached Starcom Mediavest Group (SMG) and offered to build them a software system for free – SMG definitely needed someone to help them with a media buying and planning software tool but you cannot help thinking that they may have backed the wrong horse…
- DOmedia is a strange business for someone the size of SMG to do business with – especially this sort of transactional business which is critical to SMG. We are not alone in this thinking, one network owner told us “Starcom Mediavest Group (SMG) does not seem to realize that they have just outsourced their out of home to an under capitalized startup with their own agenda”.
- Under-capitalized? DOmedia is owned by a small venture capital firm called NCT Ventures (indeed Rich Langdale is both the managing partner at NCT Ventures and the Interim CEO at DOmedia). NCT is a fund of no more than USD 20 million and so it’s unlikely that DOmedia has access to anything much more than USD 5 – 7 Million – even with funds of USD 20M it is tiny in this space.
SMG has seemingly told its clients that it needs to work through DOmedia, something which has upset nearly all of them we believe (and no doubt the Raison d’être for Katy Bachman’s article in MediaWeek), one told us “Vendors now have to engage in a wild west style negotiation with DOmedia in order to work with SMG” again this is surely laughable with someone the size and reputation of SMG.
The industry definitely needs online software systems that plan and buy more effectively, we (the industry) will eventually get there but the question at the moment and the source of all the squabbles is how are we going to get there?
Our firm belief is that an exchange is a commodity and should be free and so those, like rVue, DOmedia etc purporting to be / or become exchanges need to play in that space – a transaction fee should NOT be part of the equation.
Not everyone agrees with us but it does tends to be the smaller / newer networks that take that side – one new as yet un-established network owner told us “Nobody wants to pay transaction fees, but if it is helping you increase overall network utilization, you would be a fool not to. A 2-5% fee isn’t awful if it is helping you clear inventory”
DPAA members already of course have access to Ayuda’s online planning tool but it doesn’t take a rocket scientist to figure that Ayuda’s Symphony may well became their online buying platform of choice as well – interestingly, we understand that DPAA member, RMG Networks are one of the bigger networks to have plumped for working with DOmedia.
When Symphony is finally launched (we are told January 2011) we fully expect the creation of a free online and buying exchange – no doubt fees will be charged to agencies but for network owners this will be what an exchange should be, i.e. a ‘commodity’.
*We mean the DoMedia / SMG breakfast in NYC not our breakfast this morning