As Big Ad Firms Power Up Exchange, Two Start-Ups Fizzle

In the same week that Omnicom Group, WPP Group, and the Interpublic Group revealed plans to build an electronic platform for making media transactions, two smaller firms in the space have suffered serious blows.

AdFlight, a Belmont, Calif.-based start-up that enabled online buying and selling of online advertising, has apparently ceased operations; and eMadison, a New York-based venture aiming to create an electronic exchange for television and cable media buying, is reportedly in “hibernation” mode and seeking a buyer.

An executive at eMadison declined comment on the matter, but a source familiar with the firm says the company has reduced headcount by about two-thirds because of problems getting funding.

Officials at AdFlight didn’t respond to inquiries by press time, but a notice on the company’s site said: “Please be advised that at this time, AdFlight is no longer accepting new advertisers or publishers for our online banner network.” In February, when AdFlight’s founder, Albert Lopez, stepped down from the chief executive officer position and cleared the way for Susan Atherton to take the role, the company said it was doing fine.

The apparent ill fortune at the firms comes in the same week that the three advertising industry giants announced plans to tackle the media exchange problem themselves, hoping that they will succeed where so many others have failed or stalled.

Although both AdFlight and eMadison had appeared to be gaining traction in the marketplace — eMadison, for example, is said to have had contracts signed and at least one major agency on board — the volatility in the financial markets has made it very difficult for early-stage companies to find financing. A Los Angeles-based company in the space, AdExchange, apparently met its demise because of these conditions.

Other players, such as OneMediaPlace, MediaPassage, and BroadcastSpots.com have banded together to weather the storm, with the resulting company taking the MediaPassage name.

The difficulties of players like AdFlight and eMadison, however, might be to the benefit of the “big three” as they begin to form their new company. Both have made significant investments in their technology, and attracted well-known executives. Rather than start from scratch, the new as-yet-unnamed firm may get a head start by making some strategic acquisitions. But even without this head start, the three together have a big advantage — the clout that no young start-up could muster, which they can wield in convincing media companies to get on board.