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05.02.16

Is Programmatic TV Really Happening?

Luke Adkins, Programmatic Media Associate

When it comes to advertising, TV is the long reigning King. The $70 billion industry has commanded marketer’s biggest budgets for over 50 years and even with the online digital revolution over the past decade TV still receives the highest spend of any channel. But if Star Wars has taught us anything it’s that every empire has its downfall, and the signs that TV no longer controls the advertising galaxy are everywhere. The new force of programmatic has awakened and marketers everywhere are waiting to see when TV will fully embrace the new technology. We’ve all heard that this is the year for programmatic TV, but isn’t that what we heard last year?

 

Audiences are becoming more fragmented by the day and viewing behavior has been changing dramatically in recent years, primarily thanks to millennials and the dozens of other channels they consume media on. Regardless of advertising, the TV industry is changing quickly and now competes for the precious time and attention of their viewers every day. Digital spend is predicted to surpass TV this year (or it already has depending on who you ask), highlighting the trend that advertisers are attracted to online buys with more granular targeting. Programmatic has given us the ability to target individuals online at precise moments in their buying journeys and the technology continues to become more efficient and cost effective. With programmatic booming and TV plateauing, it seems the only logical next step to merge the two. So why isn’t it happening? Because it’s complicated.

 

Thinking like a TV executive, why on earth would you want to mess with a revenue system that, not only has lasted over half a century, but also makes tons of money? The incentives for jumping to the programmatic ship need to be compelling. The only way to enter the programmatic world as a TV company is to partner with a programmatic ad tech company or create the technology in-house. 2015 showed us the first round of programmatic TV partnerships when Dish Network announced they were testing a programmatic marketplace with DataXu, RocketFuel and TubeMogul. Last week, TV operator Sky Media threw their hat in the ring and invested $10 million in DataXu, one of the leading providers of programmatic marketing, data management, and media activation solutions.

 

Building a successful programmatic platform is not easy and I think more TV companies will start looking for partners instead of trying to build something themselves. But herein lies another problem; building a solution that caters to all parties involved is extremely difficult. Large TV networks don’t want to commoditize their inventory, ad tech companies want to be seen as the best option in the marketplace, and consumers want more relevant and non-intrusive ads. But the reality is that large TV networks will lose some of their advertising power, ad tech companies will be weeded out by who has the best technology stack, and consumers will only become more selective about their media consumption. We’ll have to wait and see who can successfully balance all conflicting interests.

 

Another reason to remain skeptical of the current programmatic TV offerings is the lack of premium inventory. Current TV ad exchanges only have guaranteed inventory from local cable companies and satellite TV firms. Big broadcast networks like FOX and NBC are not available, which means you won’t be seeing your ads during the 6 o'clock news or the upcoming summer Olympics, where the largest and most qualified audiences will be watching. Even if we look past the inventory, the technology still doesn’t compare to traditional programmatic. The main difference being that programmatic TV buys are not conducted in real-time. Supply is too low and most people who want to buy TV ads want a guarantee that their ad will play during a specific time of a specific program. In order to crack real-time bidding, networks will have to offer up primetime inventory and be able to target individuals down to the household and not just base their targeting off of outdated show ratings.

 

At the cutting edge of technology and advertising, there’s a lot of hype around “what’s next.” It’s easy to get excited about the possibilities of what could change and forget about the logistics of altering long-established industries. Programmatic is how digital marketers will finally tap into the holy grail that is TV advertising. The possibilities of household targeting, creative optimizations, cross-channel capabilities and buying primetime spots in real time is extremely exciting to think about, but there are some hurdles the industry will have to jump over to successfully adopt programmatic. Is Programmatic TV going to happen? Absolutely. Will it account for the majority of TV ad buys by the end of 2016? Probably not, but there’s always next year.