The television business is getting more comfortable with programmatic advertising, says Dave Morgan, CEO of Simulmedia, one of the pioneers in the field.
The trick in doing programmatic TV advertising is getting your hands on national TV inventory. Simulmedia started out getting local inventory from cable operators and satellite distributors. Last year, it worked directly with 10 cable networks and one broadcast network. Currently, it works with 84 of the top 90 cable nets and two broadcast networks.
But they’re still taking baby steps, Morgan cautions. “I would describe all those as relationships that we’re both taking it slow,” he says. “We don’t try to create an expectation that the world’s about to become automated and bidded. But they need to be thinking about moving some of their inventory on an audience basis” as opposed to selling shows based on their age and sex demo averages.
A weaker-than-expected ad market in general is helping the case for Simulmedia and programmatic.
“Why take a risk on something when you’ve got a good thing,” Morgan says. “Even flat audiences you still had pricing leverage. But not this year.”
Programmatic now accounts for a tiny fraction of TV ad volume, but Morgan can see it growing from a tenth of a point, to 1-5 points, to 10-20 points quickly. “It will happen pretty fast once the sellers realize they make more money on it that way.”
TV networks worry that opening their inventory to automated buying will cut commercial prices as it did with online banner ad prices. But Simulmedia says its partners never get less than 50% more than they’d normally get for their spots, and sometimes they get three to four times as much.
“When you’re valuing all of your inventory on broad averages, you miss the unique value of having heavy pizza buyers or big box retail shoppers,” Morgan says.
Big players—from Comcast’s NBCUniversal to Disney’s ABC and ESPN—are now doing their own programmatic tests.
“We quietly sit behind some of the different tests that are going on out there” as a technology provider, says Morgan. “I’m excited to see it. The more tests that people do, the more they demonstrate their openness to change.”
That openness will lead to a critical mass of inventory becoming available on a spot-byspot basis to programmatic buyers.
“It doesn’t matter if people want to buy at the spot level, if you don’t sell it that way,” Morgan says. “As cable nets, the broadcast nets, the distributors recognize that they can yield significantly more revenue cost effectively by packaging it differently, they’ll do it that way.”
Inevitably, as programmatic business grows, Simulmedia will face competition from big media companies and big media buyers.
“There will be a bit of an arms race because the buyers, folks like GroupM, they’re not sitting back. They’re investing heavily in data and tools so they can cherry pick the market,” Morgan says. “One of the things that’s going to drive the market is you’re going to have a group of people representing buyers who are cherry-picking, and have a group of people representing and partnering with sellers who are cherry-packaging.”
Morgan notes that even the biggest sellers, like a Comcast, will own less than 20% of all TV inventory. That will leave room for companies such as Simulmedia to run a secondary market by aggregating inventory from multiple media companies.
“Today we have relationships with the owners of more than 80% of TV inventory, which means we have the capacity to deliver more audience in a day than any three networks put together,” he says. “Comcast, Fox, Turner will have significant platforms and manage data on their own with their inventory first—and the secondary markets like ours will only get inventory after they haven’t been able to utilize it.”
For now, Simulmedia’s business model works because it’s helping networks sell spots for higher prices, and because its campaigns work for clients.
“We’re doing campaigns now where we’re selling on business outcomes,” he says.
One campaign was for Choice Hotels. “We beat the rest of their TV on a performance basis by 20%,” Morgan says.
Simulmedia expects to do campaigns for a number of quick service restaurants. “They have to be on TV to get people into their stores,” Morgan says, and Simulmedia will be able to measure results against credit card transactions next year.
“This makes it easier for the restaurant brands to justify their spending to store owners,” Morgan says. “There’s a real drive for accountability out there and that’s making everything we do more meaningful.”