Some say that TV should embrace programmatic, data-driven advertising and give up on its conventional ad buying and distributing methods. Others point out a lack of need for major shifts and claim, quite sensibly, that we might be forcing the adoption instead of waiting till the demand for PTV builds up organically.
As always, the marketplace is focused on driving efficiency.
Programmatic has truly done wonders for digital advertising and it’s not unreasonable to assume its benefits might rub off on TV too if the approach is applied properly. However, there’s an entrenched institution in the way TV is bought that’s nearly fifty years old. There’s a model, fine-tuned and familiar to both advertisers and inventory owners, that no one is anxious to change.
So, what’s really the future of PTV? In this post, we’ll explore if programmatic is really on the verge of overthrowing direct selling, upfronts, and manual negotiations and explain why the forces driving the adoption of PTV differ drastically from the factors that have reshaped digital.
What is Programmatic?
In digital, programmatic has come to mean automated, human-less buying of digital ads. It typically refers to machines bidding against each other in real-time auctions to serve ads on certain web-pages or brands purchasing impressions in advance using marketing software. It also encompasses data-driven and highly specific approaches to client targeting.
Before programmatic emerged, the digital space, then nascent, had been experiencing various problems.
- The direct selling model, which had been prevalent, proved utterly inefficient and cumbersome. Conventual procedures, based on RFPs and price pre-negotiations, couldn’t be made to operate at the speed of digital.
- There were bulks of unutilized inventory vendors failed to monetize.
- Google and Facebook were attaining hegemony and suffocating smaller companies who couldn’t compete with their analytical and scaling capabilities.
Programmatic was designed to remedy these issues and it indeed changed for good the face of online advertising.
Why Programmatic TV won’t Follow Digital
Linear TV long predates the advent of the Internet. It’s inner workings and, consequently, flaws are fundamentally different from those in the web space.
For the most part, TV advertising slots are purchased during upfronts – the annual meetings held by networks’ executives where they announce their primetime schedules. The remnant inventory is moved to a scatter market where marketers can buy it closer to the content’s actual airing time.
Unlike in digital, unsold inventory isn’t much of a concern in TV – there is still more demand than supply for primetime shows, major network’s CPMs are incredibly high (around $40) and, there’s no danger, in the foreseeable future, of their spots‘ value dropping down.
The direct selling methods, though ancient, have been honed. Broadcasters prefer these familiar processes (which grant them elaborate control over pricing) to any alternative digitized TV buying model they’re not clear how to operate in.
TV ad buying is a $70 billion market. It has a deeply ingrained infrastructure for buying, reconciliation, and settlement processes that centers around Nielsen ratings as a core currency. Switching to programmatic, in the digital sense of the term, would mean tearing down the well-established dynamics and setting up new foundations. This isn’t likely to happen soon.
Besides that, there’s still not enough addressable TV for sellers to shift their focus from linear channels that, historically, has driven the bulk of their revenue.
The Downsides of Linear TV
While no one’s in a rush to blow up the entire TV buying and selling ecosystem, there are definitely drawbacks to the entrenched model that a modernized approach, with automated elements, could patch.
Issue #1: the friction going into each transaction in traditional TV. Many agencies and media companies refuse to let go of manual ways of conducting business and hold on to negotiating prices over the phone, generating orders and schedules in siloed, cumbersome legacy systems, which can’t be integrated with new software, and sending them back and forth between one another for months before finalizing the terms of execution. Due to these inefficiencies, conventional methods are costly to execute. They contribute to the generation of undervalued inventory.
Local TV channels, who may also possess advertising slots in primetime shows, never get the CPMs major networks have. The system, overall, is fragmented and extremely inconvenient -marketers often refuse to contact and settle orders with each local station separately (instead of just ringing up NBC, CBS, etc.)
Issue #2: the erosion of TV’s advantages. For the longest time, linear TV used to be the only medium to guarantee to target a certain number of people (say 2 million) at a certain time (say 7 pm, Tuesday). It also had a lock on harnessing the power of video storytelling and exploiting the strong emotional connection people have to their favorite shows and movies. All of this is now being worn down as shows are being watched via various devices (with streaming services like Netflix actually producing the content) at any time. People can record and play programs back through devices such as TiVo, and this undermines TV’s ability to offer huge scale at specific hours.
Issue #3: insufficient data . The age/gender demographic targeting, which TV advertisers have been relying on for decades, limits drastically the potential of marketing efforts. By sticking to a certain age/gender brackets, companies overfish the same pond. They have no way of taping into other groups of potential clients and competitor’s target audiences.
Benefits of Programmatic TV
As we’ve mentioned earlier, programmatic in linear TV means something entirely different from real-life auctions and digitized order executions. The primary shift it brings lies in incorporating new sources of data, with more depth and width, to inform precise targeting. By leveraging multiple data sets (set-top box viewership data, publicly available social data, etc.,) and then overlaying them, PTV platforms can help define clearly the behavioral characteristics of a potential brand’s and maximize the performance of each ad campaign.
Manual, cumbersome processes (putting together a media buy contract, turning it into a schedule and then uploading the latter to legacy delivery systems) tend to introduce various errors at reconciliation stages. These are costly and time-consuming practices both sellers and buyers are striving to eradicate. A PTV solution enables automation of avail requests, orders and proposals. It can give buyers the power to reserve spots across multiple local stations from a single dashboard and help inventory owners, who are trying eagerly to prevent money being siphoned out by digital, to streamline and modernize their workflows.
A PTV platform facilitates advertisers to connect and transact easier with local broadcast. It thus allows businesses to tap into a huge amount of reach, particularly in small and mid-sized markets and helps suppliers get to national brands. Having clients lining up to buy spots, local stations can sell out their inventory at high prices. A programmatic solution, introducing end-to-end workflow, benefits all parties involved.
By automating the planning processes, which is tedious, PTV platforms take lots of time and effort out of linear TV purchasing. They might not shrink the buying workflow to a few milliseconds, as they have in digital, but they’ll certainly help reduce it a to a few days (instead of weeks and months the process can take now.)
Programmatic TV can bring to a halt some of the deeply-ingrained, inefficient practices such relying solely on the 18/49 age group and standard Nielsen demos when planning campaigns and then going back and forth for months to settle price and terms of execution. By switching to audience-based advertising (and utilizing data from various sources) advertisers can be smarter about their linear buys; they can, for example, opt for shows with lower ratings but higher indices thus targeting more prospect households at a lower price. They can start buying audiences instead of TV shows.
Want to learn more about the promise and the shortcomings of programmatic TV? Reach out to our expert for a free consultation.