High Hopes for Programmatic TV Ad Spending

Despite inconsistent growth forecasts, players in the space agree the future is very bright
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Programmatic TV AD spending continues to grow, with some studies pegging the U.S. programmatic TV outlay to account for 5% of total TV ad spend by next year. Others predict programmatic TV advertising will account for somewhere between a third and more than half of all TV ad spending in just a few years.

To gauge their perspective, B&C checked in with two programmatic ad platform providers — clypd and Videa — to get their perspectives on the progress on programmatic TV-ad buying among cable networks and broadcast TV stations and station groups, respectively.

JOSHUA SUMMERS, CEO and co-founder of Boston-based clypd, which offers an audience-based sales platform for TV advertising for broadcasters and cable networks.

What's the state of programmatic-TV ad buying and selling today?

Joshua Summers: The television market is going to go through a revolution and that revolution is going to require the usage of more end-to-end automation to be able to support the emerging requirements, from speed of processing to simplicity of ordering, varied infrastructure requirements of digital convergence into linear. For all of these things, automation is going to be a requirement to fully realize the value this business evolution is going to create.

The second thing is, as buyers and sellers continue to evolve, data is going to form a key piece of that evolution. The usage of advanced targets that go beyond age and gender will be more and more prevalent to the industry. And the ability to do that in a repeatable, scientifically way, but also in a way that doesn’t only scale with staff, but scales with technology, will be paramount.

We see all sorts of different forecasts on where programmatic-TV ad spend will be in the next few years — some low, some high. How accurate are these studies?

JS: I think they’re all accurate. The challenge is they all use a different yardstick. The concept of using data in TV is not new. The way that we’re using it, the tools we’re activating for it and the speed with which we can enable it are new. Trying to optimize a campaign based on things other than age and gender isn’t new.

Is there anything standing in our way, in terms of the technology needed to make this a dominant part of the business?

JS: I’d say three years ago there was a lot standing in the way, and two years ago we started to break down some of those barriers. We’ve got really solid technology in place when it comes to understanding how to onboard the data. There are a lot of legacy systems that are used for transaction, for ordering, for measurement. Slowly but surely we’re finding integrations that are possible with a lot of them, but the challenge is there’s no one single standard in the national, linear TV world. In absence of that, every media owner starts with a set of guidelines.

In broad strokes, who benefits the most from this shift to programmatic, the brands or the consumer?

JS: Everyone gets something different out of it. Media owners get optimization of yield across their portfolio of networks [and] the ability to really look at how drive a more balanced usage of their inventory, more than just selling primetime on a single network. It ensures they can justify a good use case back to the brand. And on the buy side, the advertiser gets a significant value in that by applying an advance target, optimizing their campaign against that advanced target, they’re effectively lowering their target CPM. Instead of just using a proxy age-and-gender CPM and impressions, you’re now looking at your true audience. They’re reaching who they want to reach, at a better price. The consumer, it’s a little different than what you’d see in, say, a one-to-one addressable delivery. There’s a higher likelihood, for sure, that the advertising that’s being shown will appeal to them.

BRETT ADAMCZYK, VP of business development for Atlanta-based Videa, which offers a supply-side platform for TV stations to deliver a live marketplace for broadcast-TV inventory.

Are the forecasts for programmatic-TV ad spending in the U.S. reasonable, is the industry headed in that direction?

Brett Adamczyk: They’re estimates for a reason, and all over the place for a reason. It depends on your definition of what programmatic spending and buying really is. The traditional arbitrage model — buy a bunch of remnant impressions, package them with a whole bunch of data and resell them — in terms of true programmatic, end-to-end, data-enabled, 5% next year is probably realistic. I think 33% by 2021 might be a touch high. But I would also point to the growth in both digital video and desktop. It was a slow drip for a while, but once the technology and scale were in place, they experienced exponential growth curves in a very short period of time.

What technological challenges remain keeping this from the dominant way of doing business?

BA: I think TV presents its own set of challenges. One of the things we’ve said from the start is that the way TV has been bought and sold hasn’t really changed for 40-50 years, so you’re dealing with a legacy infrastructure from a technology perspective, legacy systems, and a sales strategy that hasn’t really needed to change in a long time. There are both technological challenges and ingrained behavior challenges, from both the buy and sell sides, in terms of how they conduct business and willingness to embrace a new way of transacting.

Your business deals with local stations and station groups. What are the unique challenges there versus the national side?

BA: When you look at the sheer volume of stations, from a scalability perspective, hitting critical mass, and the number of people you touch in the process, there’s maybe 60 cable networks that hold the lion’s share of rating points or audience available, as opposed to thousands of station groups, individual and independent, anywhere from eight to 10 affiliates in any given market. Herding those cats, getting everyone on board, everyone trained, everyone to buy in on the platform and using the technology, is very difficult.

Who benefits the most here? Where will programmatic ads have the most impact?

BA: I don’t know if there’s a clear winner. I think everyone benefits equally if some of the promises programmatic has made really come to bear. You have significant efficiencies gained in just the sales process in general and the time spent in executing buying. The ability to allow brands and agencies to target on an enhanced-attribute basis within a specific program is very beneficial. And for the consumer, they may see fewer ads but more relevant ads. For the station side, there’s a big opportunity to see an increased share of budget, to sell on an audience basis, and understand audience composition within their schedules and programming, keeping and bringing new dollars into television as a medium.

Programmatic TV AD spending continues to grow, with some studies pegging the U.S. programmatic TV outlay to account for 5% of total TV ad spend by next year. Others predict programmatic TV advertising will account for somewhere between a third and more than half of all TV ad spending in just a few years.

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