The Outlook for Programmatic Advertising

Programmatic advertising on television is rapidly moving beyond the “proof of concept” stage to a viable reality.  In the first quarter of 2015, programmatic ad buys were placed during several prime time slots, including ESPN’s SportsCenter,[i] the Super Bowl[ii], and the Academy Awards[iii]. And at the recent 2015 Upfronts, where TV networks pitch their fall programming to the ad community, Turner and NBC were among the networks discussing plans to make portions of their prime-time inventory available via data-enabled and other programmatic means.[iv]

How it Works

In programmatic advertising, spots are sold based on the intended audience, size of that audience, and supply and demand of a certain program. The key is that this typically happens much closer to air time than traditional upfront purchases and allows buyers to pay a more market-driven price for their avail.

Another way to think about how programmatic influences the price of an ad is to look at how airlines sell tickets. Airlines use sophisticated yield management practices and detailed data to help determine how many seats to sell on a given flight and at what price.[v] While the price is still ultimately set by the airline, leveraging big data makes it easier to determine the best price based upon predictable consumption patterns, such as the demand for traveling to a particular destination from a certain city at a particular time of day.

One of the greatest concerns has been the idea that selling the highly valuable TV ad avails would mirror the type of commoditization that occurs when buying banner ads and other forms of digital media, particularly in the digital display ad market where supply greatly exceeds demand. However, sellers are never removed from the process of approving how much they receive for the inventory they sell via various kinds of programmatic methods.

In addition to taking into account market factors, programmatic uses “big data” modeling to predict an individual viewer’s engagement with an ad.  The new influences of data-enabled advertising into the TV ad buying process are requiring increased automation in transactions and enhanced research capabilities, which increase the efficiency and transparency in advertising.

Linear Television Media Buys 

Despite the growth of digital advertising, linear TV has distinct advantages and provides tremendous value to advertisers. Linear television provides a significant scale of viewers and viewing time combined with unparalleled quality of content, distribution, and now of data for research and targeting purposes.

Linear television networks are quickly adopting programmatic advertising capabilities, such as data, automation and dynamic ad insertion (DAI), that will allow them to provide the same type of predictability as digital buys. This is creating an opportunity for advertisers to integrate the higher levels of reach and audience engagement offered by linear TV into their digital media buys on multiple platforms. For example, as many as 90 television networks are now delivering their programming on an average of five media devices, according to CTAM.[vi]

Canoe, an advertising technology company focused on delivering dynamically inserted advertising to video on demand programming, reported it served up 2.56 billion ads in the first quarter of 2015. At this rate, Canoe is on pace for approximately 10 billion viewed ad impressions in 2015—a dramatic increase over the 6.3 billion viewed ad impressions in 2014.[vii] These advances build upon earlier moves, such as Nielsen’s “C3” cross-platform audience ratings, to provide advertisers with the opportunity to insert ads and measure the engagement levels through archived video content as part of their integrated media buys.  

The Role of Ad Delivery

As linear television advertising continues to evolve, ad management platforms will play a critical role in supporting the rise of programmatic ad buying. The increasingly automated processes used in programmatic ad buying are creating opportunities for media providers to hold portions of their inventory for media buys that occur closer to real time. Similarly, media buyers can make decisions about where they place an ad and which creative they will use.[viii]

Taking advantage of these opportunities will require ad delivery capabilities that can support faster turn-around times for creative approvals and centralizing ready-to-air spots for fiber-fast delivery to designated TV, radio, online and VOD media destinations. With all of these pieces in place, programmatic TV is no longer a question of why. It is a matter of when.

[i] Programmatic TV Following Its Own Path, MediaPost, May 19, 2015

[ii] Oreo and Ritz Mark First Super Bowl Ads to Be Purchased Programmatically, Adweek, January 30, 2015

[iii] Exclusive: First Oscar Spots Bought Via Programmatic, Broadcasting & Cable, February 20, 2015

[iv] Guess what Big Media pitched the ad guys, CNBC, May 15, 2015

[v] Yield Management In The Airline Industry, By Frederic Voneche, ResearchGate, February 28, 2005

[vi] TV Everywhere Industry Resource Center, CTAM, 2015

[vii] Canoe Cruises to 2.56B VOD Ad Impressions in Q1 Multichannel News, April 23, 1952

[viii] Programmatic Ad Buying: Coming to a TV Near You, Adweek, January 22, 2015