Is ‘Programmatic’ The Right Word For Automated T/V Advertising?

Five years ago the term “programmatic” began to be applied to ways of transacting automated, software-driven advertising deals on platforms more akin to the trading of stocks than traditional ad buys. Digital display was the sector in which it was first applied. Many tech start-up companies emerged and attracted advertiser interest by applying Wall Street-proven capabilities of software, algorithms and online connectivity to the cumbersome processes of digital buying of display ads. The promise of more marketplace information through this kind of buying was and is compelling to ad buyers.

Language certainly matters. In recent industry conversations, I perceive a hesitancy to use the word “programmatic” in the emerging T/V supply-side space. Instead, I am hearing more and more companies use the phrase “automated ad sales” rather than “programmatic.” Is this euphemism necessary?

I believe the more traditional providers of T/V, fearful when watching the programmatic display experience from the sidelines, have been cringing at the label. Some of those fears are legitimate. The initial mechanics and software for programmatic were developed on the buy side of the business, thus opening new levels of transparency into inventory value and market conditions. This makes publishers wary of dealing with buyers that may know as much or sometimes more about the inventory than the publishers themselves. But the sell side SSPs and exchanges are rapidly catching up.

Another fear that publishers/content producers have stems from confusing programmatic with RTB, having seen some scary pricing drops for display inventory when RTB first came out. Five years ago, display-driven open exchanges led to a kind of Wild West where blind or semi-blind deals were happening way down the long tail, and pricing reflected these non-premium placements.

Online video, unlike display, is now at a place where demand outpaces supply, and sellers also now have increasing control over what kind of programmatic sales they use for video to increase revenues and profit margins. T/V buyers have always been more concerned with brand environment / brand safety than display advertisers. They won’t be leveraging long tail sites blindly to lower CPMs.

Quoted in a February 2014 post, Google’s Bob Arnold, digital media and strategy lead, North America, defined programmatic, noting that “the ecosystem is very complicated; a lot of terms are being used interchangeably. For example, many people call real-time bidding programmatic media buying, but real-time bidding is a subset of programmatic as a whole. So it’s going to take more education and a simplification of the ecosystem.”

That education process is still needed. But the good news is that the intervening year has clarified what options are available for those entering the programmatic world. And it is really no more complicated than some of the options for buying traditional television:

Traditional Television Buying subsets:

1) National broadcast/cable network buys (national footprint, locally distributed via “wired” networks).

2) Local broadcast/cable or “spot” (market by market).

3) National Syndication (e.g., “Jeopardy,” “Ellen” — national footprint via “unwired” networks).

4) Upfront (long-term commitments for discounted pricing) vs.scatter (short term deals) marketplaces.

Programmatic T/V Buying subsets:

1) Automated Guaranteed buys (Reserved inventory at pre-agreed/fixed pricing with one seller / one buyer. Also called programmatic guaranteed, programmatic premium, programmatic direct, programmatic reserved).

2) Unreserved Fixed Rate (Reserved inventory at pre-agreed/fixed pricing, one seller / one buyer. Also called preferred deals, private access or right-of-first-refusal).

3) Invitation-Only Auction (Unreserved inventory, auction-determined pricing, one seller / few buyers. Also called private marketplace or PMP, private auction, closed auction, private access).

4) Open Auction (Unreserved Inventory, auction-determined pricing, one seller / many buyers. Also called RTB (real-time bidding), open exchange, open marketplace).

While the precise nomenclature for each of the programmatic buying subsets has not been universally settled, it will be. The functionality, opportunities and meaning of these four new subsets are clear, and can be easily understood. It won’t be hard for stakeholders to acclimate to the right jargon as they set up programmatically. Then the machines can do the work of communicating with each other. So. yes, “programmatic” should remain the term that it is, even for T/V.

This article first appeared March 12, 2015 on https://www.mediapost.com/publications/video-insider. This article can also be found on TV-The Next Generation Blog - Independent commentary by John Osborn on the business of emerging, interactive, multi-platform, ad-supported TV/Video - CLICK HERE to subscribe to his blogs.