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Guest Blog: Test and Learn—Selling the Idea of Programmatic TV

The sell side can put their fears at rest and potentially improve inventory yield while making advertising more effective through richer, more precise targeting 8/20/2014 01:00:00 PM

The TV Ad Seller’s Programmatic Trepidation

Many TV networks are taking a measured view of programmatic TV, one that weighs the efficiencies of automated workflow against the risk that their inventory value could be compromised in a world where machines perform the heavy lifting. They look at the rise seen with programmatic strategies in the digital space as having spurred a decline in the value of the advertising.

TV asset owners are loath to see a repeat of the digital scenario, even though there’s recognition that TV inventory is in limited supply and therefore more price-buoyant. On the other hand, they acknowledge that programmatic might present a game-changing opportunity to improve operational efficiency and, ultimately, yield. But rather than going over the falls in a barrel, they need to float safely to their destination. This is where testing comes in.

Testing Programmatic TV

The marketing and advertising industry is no stranger to the practice of “test and learn.” Testing is the crystal ball routinely used to get a better fix on the future performance of creative, offers, promotions, and even media channels. Testing will help close the gap on two sell-side bones of contention about programmatic TV in the marketplace:

1. Control over pricing: Sell-side networks fear they will lose control of inventory pricing. Today’s supply-side platforms (SSPs) provide sellers with the ability to invoke inventory price floors to lock-in revenue minimums. By employing a SSP, sellers take the lead on price protection rather than react to demand searching for bargains.

2. Control over market structure: Sellers, like buyers, are free to enter into any type of transactional scenario that meets both their risk tolerance and ability to achieve specific transaction goals. There are many variations of programmatic transaction formats that range from private market to direct selling.

Test Automation First; Marketplace Pricing Implications Will Flow from Trial

Sellers looking to assess the true impact that programmatic might have on marketplace pricing must first become steeped in the mechanics of the programmatic process. There currently exists no programmatic TV process playbook to guide buyer and seller; they may create their own rules that will ultimately formulate programmatic TV best practices. Automation is a core aspect of programmatic that requires both buyer and seller to define their rules of engagement, complete the transactions, then learn from the experience. Automation exists in the SSP which is integrated with existing inventory management and traffic and billing systems. The following is a list of programmatic considerations for both parties:

•   Inventory type – There are various flavors of TV Asset inventory. Linear, addressable, and video-on-demand (VOD) represent core transactional volume while TV Everywhere (TVE) and Over-the-Top (OTT) distribution sources are on the horizon.

•   Inventory quality – Will the seller make premium inventory available or restrict the menu to 2nd or 3rd tier networks and/or dayparts?

•   Inventory transparency – Most likely the inventory would be described at the network and daypart level, given programmatic’s focus on impression-based buying.

•   Inventory pricing – The buy-side can set a ceiling limit on CPM to achieve efficiency goals while sellers may set price floors to meet revenue requirements and protect against deflationary impacts.

•   Budget – At what volume of inventory does it make sense to transact programmatically?

•   Advanced transactional targeting – Marketers and media partners now have access to numerous types of data and tool sets and platforms being built to leverage set-top-box (STB) logs, census statistics, automatic content recognition (ACR) and syndicated rating products. From these resources they can define more advanced target audiences vs. standard industry metric currency. For example, home insurance intenders vs. adults 25-54.

•   Post-evaluation – What metrics will be used to guarantee audience delivery? Standard currency or advanced targets? Both?

The above list of transactional elements can be thought of as control “settings” for conducting business, where both buyer and seller can use multiple levers to shape a deal to their liking. Neither party’s feet are to the fire. They both define their requirements and the outcome is simply a matter of marketplace dynamics, in automated fashion.

Benefits of Testing: Risk Reduction, Pricing Preview and Yield Efficiency

So, what does the sell-side stand to gain by testing programmatic?

•   Risk reduction – By learning the mechanics of the programmatic process, TV networks will come to know that they have full control over their inventory pricing and, therefore, revenue safety and will be able to benefit from this new strategy.

•   Sandbox for testing pricing models – Pricing approaches can be developed that work best for individual networks’ inventory types and characteristics. This would provide TV networks with a way to project future marketplace pricing and decide on the volume and types of inventory to be sold programmatically.

•   Potential to improve inventory yield – Here are a couple of considerations that suggest the possibility to increase revenues:

•   Richer inventory valuations – Capability to describe TV audiences in greater detail for more effectively targeting advertiser consumer segments. Break up inventory into smaller pieces to be valued at the “effective target” CPM vs. standard age/gender metrics.

•   Staffing efficiency – Free sales staff to focus on developing more profitable relationships especially for inventory residing outside of programmatic realm like multi-year deals, sports events, sponsorships, etc.

•   First-mover advantage – Become operationally ready to execute programmatic TV when activity begins to achieve critical mass. Shape the practice of programmatic TV in the marketplace, help create the structure.

By testing programmatic TV, the sell side can put their fears at rest and potentially improve inventory yield while making advertising more effective through richer, more precise targeting. And the old test-and-learn approach to media decision-making can be re-phrased appropriately to “test and relax!”

Gerard Broussard serves as the principal for his consulting practice Pre-Meditated Media; he also serves as a consultant for clypd, a supply-side technology platform for programmatic TV advertising. Prior to re-engaging his consulting practice, Gerard served as VP, media insights & analytics, at Canoe Ventures.

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