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Sluggish Programmatic TV Could Finally Pick Up Steam

Programmatic ad buying was prophesied to take strong root in the TV industry last year, just as it had overtaken digital advertising.

While such automated buying is still growing, it has not exactly taken the TV industry as much by storm as it has led to isolated showers across agencies and TV networks.

Still, the recent merger of video distributors who see advanced advertising as a business opportunity could boost the sluggish growth of programmatic TV. “What we’re looking at is continued increased scale,” said Luke Stillman, VP of Digital Intelligence at media agency Magna, pointing to such combinations as AT&T’s U-verse TV with DirecTV and Charter Communications’ acquisition of Time Warner Cable and Bright House Networks. “A big stumbling block for addressable television to this point has been scale of the audience.”

Stillman said he sees the mergers as having a positive short-term impact. “We see it as moving the ball down the field,” he said. In Magna’s view, addressable advertising is the best application of programmatic technology in the TV business.

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“When you really get into addressable television, you can look at digital actions that those people took,” Stillman said. “You could look at an offline sales database; it’s really a lot more direct response.”

Todd Gordon, director of programmatic TV at Adobe, has taken a broader view of programmatic beyond addressable. He’s also more optimistic about programmatic’s progress. “I don’t think there’s any question that, more broadly speaking, data-driven, more-automated TV buying is growing very rapidly and really becoming a part of how TV is done,” Gordon said.

Running Up Against Resistance

Unlike the digital world, which rapidly adopted programming for the majority of transactions, Gordon said the TV industry has been more resistant to departing from the more traditional approach to media buying and selling.

“The TV landscape, the way people view TV, has gotten increasingly more complex,” Gordon said. “The amount of data and different types of data that you can use to target TV increased exponentially, but until the last year or so, the basic way TV was bought and sold hadn’t changed very much.”

TV’s annual commercial bazaar—the up-fronts— is just around the corner. While there will be a good amount of talk about data and programmatic from the stages of such august venues as Radio City Music Hall and Lincoln Center, for the most part it will likely be business as usual.

Networks, agencies and clients are coming around, though. “You’re starting to see big companies that control a lot of the inventory supply really think about how to get value for their inventory based on audiences determined by data instead of only by environment,” Gordon said.

“People are writing articles saying programmatic TV isn’t here or isn’t happening, but that’s not what we see and not what our clients see,” Gordon said. “We see it happening in a very significant way. I think 2017 is shaping up to be even more of that.”

A recent report by the advertising-software provider Videology tallied a 273% increase in spending on what the company called advanced advertising campaigns using linear TV over the past 12 months.

At the same time, Videology also reported an 840% increase in the number of TV impressions available to be bought and sold using programmatic technology.

The campaigns are using more and more first-party data—that is, information collected by the marketer itself—to target specific audiences. Videology found that 28% of the campaigns employed data such as purchase histories, website visits, registration data and loyalty-card transactions to guide ad campaigns.

The use of technology improves the effectiveness of TV advertising, Gordon said. Not so long ago, TV ads were the gold standard, in terms of the ability to capture consumer attention and generate sales for goods and services.

“I truly believe in the power of TV advertising,” Gordon insisted. “I’ve spent almost my whole career trying to help clients make smart decisions with their TV-advertising dollars. And the potential to reach people and influence them through TV right now is the greatest it’s ever been.

“But you’ve got to be smarter about how you do it and the traditional ways of just picking out the most popular shows among the broadest group of your consumer base just doesn’t just doesn’t get you there,” he said. “People watch in such complicated and diverse ways and there are so many options. You can’t do it intuitively anymore.”

Digital Shifts

With Facebook, Google and other digital forms of advertising, marketers believe they have a better handle on who is seeing their ads and how much impact it’s having. And they’ve moved some TV money to digital in search of better return on investment.

“It’s a situation where without using technology average clients aren’t getting as much from their TV buy as they could. No matter how big a negotiator you are, no matter how much clout you have in the marketplace, picking up the phone and getting a plan over as a PDF and trying to work through the whole thing doesn’t let you be as productive in getting the full value out of your spending,” Gordon said. “It’s too complex, and there’s too great an opportunity to not use software to help make smarter decisions.”

That said, a good portion of TV advertising should continue to be bought based on quality of programming and the compatibility of content with the advertising messages.

“There is a very big chunk of TV that is very appropriately still being sold based on the quality of the environment and the quality of the programming,” Gordon said. “There is nothing wrong with that.”

“But at the same time, I think there’s near-universal recognition that there’s another way of doing TV that is software-driven, that lives right alongside that,” he added. “There’s two sides to this coin. One is more automated and more data-driven; one is more high-touch and more deeply integrated.”

Even if it is growing rapidly, programmatic still accounts for a tiny portion of TV ad sales.

One issue is that the bulk of the inventory available for programmatic buying is in the two minutes of local ad time per hour allocated to local TV stations and cable operators.

In that limited pool, “far less than 100% of that is being bought addressable,” Stillman noted. “It’s more limited by demand than supply.”

BIA/Kelsey, which recently forecast that local video revenue would hit $32.1 billion in 2017, estimated that only 1% to 2% of local TV is being bought using programmatic technology. But the research company thinks programmatic will benefit local TV by keeping ad dollars in the medium that might otherwise shift to digital.

“We certainly expect to see healthy growth in local programmatic TV and more generally advanced TV to also include connected TV, OTT,” BIA/Kelsey Managing Director Richard Ducey said.

Putting TV on Target

“Programmatic adds much better targeting to broadcast TV, so that should make it more competitive with digital. Because of this, and because local TV-ad inventory works well by itself and even better in combination with digital, we see strong prospects for local TV,” Ducey said.

“As local TV innovates, perhaps with deployment of ATSC 3.0 content personalization, targeting and interactivity, broadcast TV at the local level becomes even more competitive with digital,” he said. “This is the kind of background thinking we’re factoring into our forecast and insights around the driving trends.”

Stillman said brands are still looking at running programmatic campaigns as an experiment.

“It’s a bit of a chicken-and-egg problem. A lot of CMOs might want to make sure it’s going to be worth the extra cost before jumping in. The experimentation phase always goes on a little longer than one might hope if you work at an MVPD,” he said.

Early on, some CMOs might have looked at programmatic as a money-saving technique, with software replacing personnel.

“It’s turned out that it’s not a lot cheaper,” Stillman said. “What you do is you get a better outcome for the same cost. You can improve your measurement, improve your targeting, add a little more precision to your campaign.”

Gordon said programmatic will grow only if all of the industry’s constituents perceive a benefit.

“It obviously has to work for advertisers,” he said. “If using data and software doesn’t give you more for your money, doesn’t drive better performance, there’s no reason to do it. But I think it’s clear that it does.”

“From a supplier standpoint, if selling some of their inventory based on audience and based on data is a way of getting more for inventory that they have, then similarly if they can sell it for more they would,” Gordon said. “We’re all in for-profit businesses. They’re going to sell inventory in the way that generates the most revenue for them.”

Programmatic can also be good for TV viewers, he added. “I really think we can use data and technology to lower clutter, have more relevant ads and really improve the video-viewing experience for the customer,” he said. “And if we can use these things all together—better yield for suppliers, better ROI for advertisers and, at the same time, that creates a better experience for our customers— that’s really the perfect combination to help this thing accelerate.”

Jon has been business editor of Broadcasting+Cable since 2010. He focuses on revenue-generating activities, including advertising and distribution, as well as executive intrigue and merger and acquisition activity. Just about any story is fair game, if a dollar sign can make its way into the article. Before B+C, Jon covered the industry for TVWeek, Cable World, Electronic Media, Advertising Age and The New York Post. A native New Yorker, Jon is hiding in plain sight in the suburbs of Chicago.