Programmatic TV is in its nascent stages, with many buys completed, in progress or on the books for the immediate future. And the ad industry is seemingly fixated on two milestones: 1) the future volume of programmatic ad transactions and 2) the speed of programmatic volume growth.
The wild card for accelerating the rate of programmatic TV adoption is likely to be a pivotal event where at least one set of buy- and sell-side partners becomes aligned on rules of engagement. They will then execute a major deal involving one or more national advertisers that puts the rest of the marketplace in motion. How soon this programmatic tipping point is reached depends on the pace at which agency buyers and TV network sales leaders become knowledgeable of, and comfortable with, automation and rich data entering the transaction process. The outcome must be mutually beneficial in tangible ways.
Let’s take a closer look at current points of agreement between buyers and sellers as well as where they differ on programmatic TV. Both parties are interested in delivering advertiser’s targets more effectively and would benefit from the operational efficiencies of automation.
But let’s explore the gaps between buyer and seller. The most fundamental difference with any media transaction is pricing—buyers want lower CPMs while sellers want to improve yield. Next, most media agencies seek speedy adoption of programmatic TV in the hopes of achieving operational efficiency while reaching their target audiences more effectively in an increasingly fragmented TV marketplace. Conversely, sellers are apt to be cautiously deliberate as to ensure that the value of their inventory won’t be unduly compromised in a programmatic environment. Finally, there’s the issue of pricing elasticity and rate integrity. In this case, sellers have the luxury of a market where demand traditionally exceeds supply. As such, the programmatic TV ball is really in their court, as the game cannot be played without them.
The reality is that both buyer and seller can potentially benefit from programmatic TV. Media agencies can achieve lower effective target CPMs (true advertiser target) while sellers can improve yield. And all players complete transactions in less time, with fewer mistakes.
Programmatic Tipping Point: Could it Be First Half 2015?
The last major innovation in TV transaction procedures was arguably the change to C3 ratings in 2007, whereby live viewing audiences counts were supplemented with DVR viewing to the same TV program within a 3-day window of the live event. Once the first major deal was announced between GroupM’s MediaEdge and NBC, all other market players jumped on board. Today the industry is considering extending the 3-day period to a full 7 days.
The more recent emergence of programmatic management units on both sides of the marketplace is strong evidence that we’re setting up for another transformational event or series of them that will accelerate adoption. Unlike earlier attempts to create auction-based exchanges for linear TV, a more informed programmatic approach has emerged. The attraction now for both buyer and seller is automation and private deals whereby both parties can create rules of the deal to their mutual liking. The word “mutual” is the operative take-away as there has to be agreement of terms before any meaningful action unfolds.
The question is when this tipping point of mutuality will happen. Earlier this year, buzz surfaced about NBCU and ABC moving closer to taking the programmatic plunge; NBC hinted of releasing a portion of TV inventory during this year’s upfront market while ABC splashed the news with tests of digital video inventory sales.
In 2015, it’s quite possible that some TV networks will position programmatic TV capability as a point of distinction prior to initiating upfront sales in May. This means we will likely see more posturing and perhaps one or two actual deal announcements.
There’s been no shortage of debate about the growth rate and eventual volume of programmatic TV transactions. Strategy Analytics of Boston stated in a May 2014 report that 20% of TV will be sold programmatically by 2018 after the industry paces through the process learning curve. But 2015 may likely be the year that offers a portentous signal about programmatic TV’s future, certainly if a few vanguard national advertisers and TV networks form the catalyst for the rest of the industry to jump in. We will soon see.
Gerard Broussard is an advertising research advisor with a broad diversity of experience covering digital media, audience measurement, ROI modeling, media strategy and marketplace analysis. He also serves as a consultant for clypd, the supply-side technology platform for programmatic TV advertising. Prior to re-engaging his Pre-Meditated Media consulting practice, Broussard served as VP, Media Insights & Analytics at Canoe Ventures, a cable operator joint venture created to build out advanced TV platforms across member MSOs. He also worked at Kantar Media, GroupM and CBS.