In an exciting announcement, Donovan Data Systems and MediaBank today agreed to merge, subject to regulatory approval.  If you are not an ad agency executive or a major advertiser, you may not have heard of these private companies (each reportedly with $500 million in revenue), but they are intimately involved in the planning, buying and selling of advertising space (e.g., TV, radio, digital, etc.) In particular, Donovan has been around a long time and virtually acted as the ERP of the ad agency world–keeping out folks like Ariba, SAP, etc.  I’ll talk more about MediaBank below–it is fascinating.

I’m not an expert on media buying, but some forms of media (like national TV) have been standardized over the years and can, in theory, be bought and sold electronically.  There is still a lot of craziness in doing so with “up-front” markets versus spot buys.  But broadcast TV looks downright commoditized compared to other forms like spot radio, billboards, etc. which have resisted automation.  Keyword search has obviously been dominated by Google (who practically invented the medium itself) and Google has pushed into display as well, through its acquisition of DoubleClick.  (Now I’ve basically reached the limit of my limited knowledge!)

MediaBank and Donovan aim to build a “neutral industry platform” or ” industry operating system” as they call it, for all forms of advertising.  The platform would be neutral in the sense that these two companies, unlike Google, do not own ad space directly (they do not operate a media vehicle), nor are they a direct buyer of ad media, like an agency would be on behalf of their customers.  They are truly looking to build a “marketplace” for planning, buying and executing media purchases with Media Ocean acting as the middle-man.  In 1999 we would have sent their stock soaring, in 2001, we would have laughed and now we are back to 1999–it will be a $1 billion company.

The two companies seem to realize that fighting each other was not going to work and that scale was needed to take on the behemoth Google has become.  Yet another industry consolidates with major players seeking to dominate.    Google will need to learn the non-digital world while Donovan and MediaBank do the opposite.

Now for the really fascinating part of this story that readers of this blog will know, but that others may not–who is behind MediaBank?  Believe it or not, Lefkofsky and Keywell, the same guys who have done Innerworkings, Echo Global Logistics, and Groupon!  Lightning striking again?  Nope, those guys looked at large b2b markets that had perishable inventory, fragmented buyers and sellers and decided to apply automation to them to build marketplaces or at least technology-enhanced managed service providers.  You have to hand it to them as having created a lot of value in multiple industries with one theme.  Having said that, I’ll have to do more work to figure out if this one will be a managed service provider or a true IC–a distinction I have written about in a prior post.  I suspect this will be a true IC, as the agency provides the service.

It’s an exciting time to be following these Industry Operating Systems or Industries in the Cloud as I have called them.  The technologies, investor communities and users are all ready at the same time, whereas only the investor community was ready in 1999.

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