John Temple, the former Publisher of the Rocky Mountain News, has an interesting series of columns on "What local newspapers should do" on his blog "Temple Talk." All of them are worth reading but we wanted to draw your attention to #6, in which he suggests that publications could fix the amount of inventory (ads for sale) available in each issue and then use an auction format to drive up the price. 

It is an interesting idea. To understand why, you have to think for a  minute about why auctions on eBay work. In general, the people bidding on eBay drive up the price of the goods they are bidding on because they perceive the item to be unique. So, if that teapot was on a shelf with 20 others just like it, the perceived value of the item would be diminished. However, that same teapot on eBay has a chance of selling for much higher because there is the perception by the buyer that they have limited access to the item they covet.

To a lesser extent this is also true with mediums like radio and television, which are time-based. There is only one ad that will run on NBC tonight at 8 pm, so the value of that ad is increased by the uniqueness of the inventory.

Publications have never been able to integrate the same feeling into their efforts to sell inventory. There may be odd exceptions - page 3 of a national magazine, or the back page of a daily newspaper - but these are rare. In fact, Mediabids, Google, the Boston Globe and Sports Illustrated have all, independently, tried to auction off ad space unsuccessfully. The model employed has typically been to take a half page and open the bidding at the minimum amount a publication will accept, with the expectation that advertisers would compete with each other an bid the price up. It never works primarily because the perceived value of the ad is diminished by the fact that a publication can always print more pages.

John Temple's idea to fix the amount of inventory available, changes that.

Those of you who use Mediabids know we currently operate two very successful auction formats on our site. However, in both cases we are essentially auctioning off the advertiser's money, which works because it is a finite entity. So, in Mediabids' auction models, the publications compete for the advertiser's budgets.

John Temple's suggestion is more publication-centric than our approach but it could have some interesting applications. For example, instead of selling as many ads as possible for a special section, publications could define a set number of ads and then auction them off. It reduces the costs associated with the sales process and it could potentially drive the price of the ad space higher than the publication would have ever assumed it could go because the inventory is unique. If there are eight florists in your town and you only offer four spots for florists to advertise in a Bridal special section, it only stands to reason that the florists would pay a higher price to advertise than they would have if you had the inventory to sell to all eight. 

If I was running a publication, I would try it.