One of the hottest topics in the advertising industry is programmatic television. The latest figures show that an estimated 4-5% of all TV buys in 2015 were purchased programmatically. While this is a low percentage of the total, it represents a $2.5 billion industry that has developed in a matter of months. That’s a big deal.
However, the term ‘programmatic television’ can be the source of misunderstanding at best, and heated debate at worst, among the media community. Much of this confusion can be attributed to the many names that are being used to describe the concept and its related technologies. Terms such as ‘advanced’ or ‘enhanced’ audience targeting, and ‘addressable’, ‘data-optimized’ and ‘programmatic’ TV are often being used interchangeably. As a result, it has become increasingly difficult to understand what is available today, what may be coming in the future and the immediate impact on the way TV advertising is being bought and sold. At Harmelin Media, we took a deep dive into several components of this complex topic to separate reality from the fantasy, understanding the drivers and discussing what’s currently executable.
The first thing we need to do is to define what we mean by programmatic TV (or PTV). Simply put, PTV uses technology platforms to automate the TV buying process with precision targeting. However, this simplistic definition is not enough to adequately describe the shift in the industry. After all, agencies have been using technology platforms to automate the TV buying process for years, and have invested millions of dollars on consumer research to craft highly targeted TV schedules. So, what exactly is new?
The rise of programmatic TV, and the resulting fundamental shift in the TV landscape, comes down to three key shifts that are now converging into a single platform or operating system:
- New advanced targeting
- Expansion of addressable TV
- Advanced consoles for campaign management
Overview of the Converging Shifts in TV
- New Advanced Targeting
One of the basic promises of PTV is the ability to target consumers beyond the basic demographic standards that exist today. In other words, instead of buying ads targeted to an audience of females who are between the ages of 25-54, marketers can target their ad based on a wide range of data including purchase habits, psychographic data, financial profiles, life stages, current customer data and many more dimensions.
This targeting data can come from third party providers, a client’s own CRM data or through other partnerships. The targeting data can then be matched against set-top box viewing data in order to precisely identify consumer profiles at the household viewing level. Alternatively, data can be matched against Nielsen panel data. In other words, if an insurance company wants to target households with married couples with an income of $100K+ who just had their first child, we can now identify that household and the TV viewing habits of that household.
- Expansion of Addressable TV
While new targeting data allows us to identify precise profiles, addressable TV allows the delivery of advertising to the individual household based on targeting criteria. Currently, this is still being tested in pockets of the country. Most notably, companies such as Comcast, DIRECTV and Audience Express each have proprietary approaches to deliver targeted ads to a specific household. In addition, Dish also has an addressable offering. Addressable is possible, because it is targeting on the set-top box HH level. MVPDs, multichannel video programming distributor (i.e. cable providers), who own the set-top boxes have control of this data.
In addition, new technologies are shifting the TV viewing habits of consumers. As a result, there has been a dramatic increase in the number of consumers using video on demand (VOD) and over-the-top (OTT) TV viewing. These cloud-based video delivery technologies are largely independent of the infrastructure of the traditional TV delivery systems, and are opening more possibilities for targeting ads to the individual household level.
- Advanced consoles for campaign management
This is one of the most immediate benefits that the advent of PTV has delivered to the industry. New software platforms have been developed to allow marketers to plan, analyze and execute video media campaigns across more dimensions and with more granularity than ever before. These software-based planning platforms allow marketers and agencies to look at different targets and optimize schedules based on different scenarios.
For example, they allow seamless movement from evaluating costs-per-point to costs-per thousand. They allow the analysis of audience overlap between networks, and between linear and digital video. They allow better management of frequency across screens. Most importantly, they shift the strategic planning of video from the silos of TV and digital into a unified and integrated approach.
Without a doubt the industry is in the middle of some profound changes, but as with any technology-driven change, there are some distinct phases of adoption. Gartner Research identifies five key phases in their “Hype Cycle.”
- Phase 1: “Technology trigger” = Fast acceleration of expectations (hype)
- Phase 2: “Peak of inflated expectations” = Hype outpaces reality
- Phase 3: “Trough of disillusionment” = Retraction of adoption due to disappointment
- Phase 4 “Slope of enlightenment” = Re-adoption based on realistic expectation
- Phase 5: “Plateau of Productivity” = Mainstream adoption based on value
Surprisingly, PTV has quickly and quietly moved through the first three phases of the curve in just a few months. We seem to now be at the beginning of Phase 4, the “slope of enlightenment,” and we have learned a lot along the way. While the promise of PTV is still alive and well, there are still some very real limitations that need to be addressed and considered.
Some Limitations (for now)
As marketers begin to explore PTV, you need to be aware of the limitations and resist the allure of the “Peak of Inflated Expectations”. Even so, these limitations should not be seen as deal breakers, nor as permanent obstacles as solutions to many of them are already in progress. That said, some of the key limitations with current state of PTV include:
- Targeting limited by privacy
Advanced targeting has practical limitations due to privacy concerns. So, while marketers may want to identify specific individuals (true 1:1 marketing), the industry has imposed self-regulatory guidelines to limit how much we can actually know about someone. As a result, all targeting data is anonymized and targeted audiences are almost always combined with other ‘modeled’ prospects that fit similar characteristics.
- Inventory limits
The broadcast entities that own the TV commercial inventory are limiting the amount and type of inventory that they will sell programmatically. In most cases, only a small portion of the commercial inventory will be accessible through PTV, and more often than not, it will be unsold remnant inventory. Commercial time in key programs and dayparts will not be sold programmatically because the stations can sell this air time at a premium rate. However, the national inventory conversation is changing rapidly. National networks are leaning in and providing premium inventory (non-remnant).
That said, there is a particular issue of scale at the local level. While many cable networks are allowing programmatic transactions at the local level, local broadcast stations are among the last providers to participate in this marketplace. However, in January of 2016, the Television Bureau of Advertising (TVB), the trade group that represents local TV broadcasters, launched a coalition to develop and evolve guidelines to help facilitate the growth of local PTV.
- Fragmented addressable solutions
Addressable TV is entirely dependent on the TV delivery infrastructure. In most cases, the infrastructures are not in place to address each household individually. As a result, addressability only exists in pockets with limited consistency across systems. This leads to logistical complexities and obstacles to deliver a scalable, addressable solution. Addressable TV is dependent on MVPD (cable providers) capabilities. We are in the infancy of addressable TV, because not all cable providers provide the same capabilities, measurement or inventory. There needs to be a standard across all providers in order for addressable to be scaled.
- No horizon for true real-time-bidding
One of the core value propositions of programmatic media buying in the digital space is the participation in real-time-bidding auctions. This will not only help drive down costs, but it will drive real-time optimization and serve as a strategic platform by allowing marketers to prioritize audience segments though bidding strategies. While we have no doubt that this will eventually come to PTV, in reality, it is at least several years down the road and is dependent on the scalability of addressable solutions.
- We need a better currency
This is one the biggest topics of discussion around PTV. While the targeting may change, the currency is still based on delivery of a traditional demographic target. This is hardly an ideal solution. That said, it is at the top of the list of all the major players in the industry to address, including Nielsen. Expect some changes in the near future.
Current Use Cases for Programmatic TV
Even with the imperfections and limitations of PTV, there are some very good use cases for marketers to leverage today. Granted, most of the use cases apply to national and large multi-regional advertisers. However, as the industry continues to advance, even local advertisers will start to see some benefits.
- Video on demand at scale: Some PTV platforms have successfully aggregated VOD inventory across systems in order to make the media transactions more seamless and consistent.
- Improved targeting: Big data can be used for more precise targeting of prospects. This can reduce waste, especially when demographics are not very good predictors of customer behavior.
- Better control of reach and frequency: PTV systems can optimize campaigns by intentionally targeting (or not targeting) the same viewers.
- Cost savings: In some cases, PTV can be a good tool to reduce costs. This is done by automating purchases when prices fall below an identified threshold. This allows advertisers to take advantage of last-minute buy opportunities.
While there is still a lot of progress to be made, programmatic TV shouldn’t be ignored by advertisers.
“Programmatic TV is a reality today with advanced data sets, ample inventory availability and automation across multiple partners” – Oscar Rondon, Sr. Director, TV Strategy for TubeMogul.
As such, marketers need to start thinking about it now and actively discuss its implication on their current TV strategy. If you are not already actively testing PTV, you should take the following steps:
- Work with your agency to start investigating feasibility now – understand the limitations and benefits for your particular needs.
- Work with your agency to identify one or two key technology partners that can address specific, high-value use cases for your brand – this is a complex space; chose your partners wisely and treat it as a partnership.
- Test when appropriate to better understand workflow, options and reporting – don’t expect game-changing results with the test, but look for signals on its future potential.
PTV is expanding quickly and marketers who are asking the right questions early on will be better prepared to exploit the benefits when we finally hit Phase 5, the “Plateau of Productivity.”