The Programmatic TV Opportunity

Reposting an article I wrote for the ANA in December 2017.

How automating TV ad transactions makes the worlds’ most effective medium more accessible and targeted than ever

Programmatic has grown to become the dominant way to buy digital advertising. According to eMarketer, as much as 83 percent of display ad spending will be traded programmatically by 2019. Its importance is only growing as programmatic platforms take the lion’s share of sales activity on closely related formats like mobile and digital video.

The television industry has been slower to adopt programmatic ad sales, but that is changing quickly. Local TV broadcasters, which have a far more fragmented inventory pool than national networks, are now offering access through programmatic TV platforms to an immense new source of inventory that was previously too cumbersome to review and secure, even for experienced media agencies.

This is great news for marketers looking for new ways to reach target audiences with TV. Programmatic TV makes ad campaigns more efficient and transparent and creates opportunities for marketers to use their data for audience targeting.

Together at Last: TV Reach, Digital Precision

Let’s start with a brief reminder the marketing value of TV — the most effective ad medium for engaging target audiences. According to the Video Advertising Bureau, which compared TV against other media formats, TV wins on the crucial measures of reach, time spent, and impact — even with millennials.

Per Nielsen, there are TVs in 95 percent of U.S. homes and the medium reaches 88 percent of Americans. The average American spends more than 40 hours a week watching TV. And it’s effective: in 2015, MarketShare measured five years of data from major advertisers and concluded that TV delivers more sales lift than any other ad-supported medium at similar spending levels.

Still, TV is not always a go-to channel for consumer marketers. Some say that its reach is wasteful compared to digital’s granular targeting capabilities. Furthermore, the most commonly used data for targeting TV audiences is relatively unsophisticated.

Programmatic TV responds directly to those objections with two key enhancements: it opens access to fragmented pools of inventory, and it can infuse any data set to ensure the right spots are selected to reach the right audiences.

Because of these benefits, many analysts say that programmatic TV will be a significant share of total TV spending because it makes its advertising even more valuable and attractive to marketers. SNL Kagan estimates that between six percent and 15 percent of TV ads will be purchased programmatically by 2020. Similarly, PwC predicts that programmatic TV advertising will be one-third of global TV ad revenue by 2021.

Anecdotal evidence is surfacing that programmatic TV’s early adopters are getting strong results. On a recent episode of AdExchanger Talks, Denise Colella, SVP of advanced advertising products at NBCUniversal, said her company’s Audience Targeting Platform has renewal rates upward of 70 percent, with many returning buyers doubling and tripling their spending.

Programmatic TV’s Low-Hanging Fruit: Local TV

By making it easy to access, evaluate, and reach fragmented audiences online, programmatic has quickly grown to be digital media’s top buying method for display and video advertising.

Is there an equivalent in the TV world of hard-to-buy audiences ? Is there a ‘low hanging fruit’ of ad inventory and viewers that programmatic platforms can help brand marketers access?

In fact there is: local TV.

Local broadcasters offer the same great audiences as national. Marketers can run ads on the most prestigious programming while also associating their brands with local programming, news, weather, and sports. Programmatic TV makes it possible — and painless — for brands to geo-target audiences of local newscasts (the most trusted TV news source, according to the TVB), syndicated hits, daytime talk, live sports events, and primetime programming.

Local TV campaigns can target regions where brands have high penetration or audiences that index highly on specific attributes. “[With programmatic TV], I can engage Merrill Lynch high net worth customers on a household level across 15 markets. [Fifteen] markets is probably 70 percent of Merrill Lynch customers,” said Lou Paskalis, SVP of enterprise media planning at Bank of America Merrill Lynch, in a recent WideOrbit white paper. “It’s really exciting. It’s almost opening a channel that’s been closed.”

Local station groups are among the enthusiastic participants in the new programmatic TV ecosystem, making local TV inventory more accessible to buyers than ever before. In fact, at this writing, programmatic TV platform WideOrbit offers local TV inventory from stations that reach more than 95 percent of U.S. households. That’s more than 110 million homes and 265 million Americans — scale and then some!

Until now, it was relatively complex to purchase spots from local TV broadcasters at scale. Each media market has TV stations owned by a different combination of groups. There is little consistency between national broadcast network affiliations or which stations run certain syndicated programs. Taken together, these factors make it challenging to make local TV transactions at scale quickly and efficiently.

For agencies, the complexity of buying local TV with legacy processes is increasing as their clients demand more sophisticated campaigns and less waste. In addition, agencies are still burdened with complicated administrative post-sales tasks like reconciliation and assuring that audience delivery goals and make-goods are fulfilled.

These circumstances conspire to make local TV a lost opportunity for brand marketers. Even though it’s proven effective and offers unparalleled reach, some agencies are unwilling to recommend local TV campaigns because they can’t execute them at margins sustainable to their business.

Programmatic TV dramatically reduces the transactional frictions of buying local TV. “[L]ocal buys become very cumbersome when you start to scale them out, and take a lot of preplanning,” says Vic Walia, senior director of brand marketing at Expedia, in WideOrbit’s white paper. “Programmatic gives me a lever to investigate these options.”

Audience Targeting and Programmatic TV

The most exciting aspect of programmatic TV for marketers is the newfound ability to combine TV’s undisputed reach and impact with data and digital media’s precise targeting practices.

“Television is an incredibly efficient market, not in ROI but CPM. The downside is spill: We reach people who are not interested in the product,” Walla says. “Digital is much more interesting from a targeting perspective, but it’s hard to scale from a reach perspective and it’s expensive. We want to optimize cost and reach. Programmatic TV bridges that divide.”

The vast majority of TV buying is still based on two blunt audience measurements — gender and age. For the most potentially impactful media buy, brand marketers have been forced to disregard the consumer preferences, demographics, and psychographics that they normally use to determine their marketing mix.

Programmatic TV lets marketers target TV audiences with the same finesse as digital video, enabling the use of audience profiles from digital activities for TV planning. This has the knock-on effect of eliminating potential waste and driving down TV’s overall eCPM (effective cost per mille).

The programmatic TV success stories to date are from direct response and digital-first brands that have a discipline of test, repeat, optimize in their marketing DNA. For example, dataxu collaborated with DWA and WideOrbit earlier this year on a local TV campaign across multiple markets for a national telecommunications provider. Using website activity as a proxy for attribution, dataxu found that programmatic TV spots drove 11 times more engagement than a control campaign planned with traditional agency processes.

Other Programmatic TV Benefits: Service, Flexibility, Transparency

Programmatic TV brings many other new benefits to TV ad campaigns. Because of its transactional efficiency, agencies can divert their limited resources to offering higher-value client services. Instead of spending a significant proportion of their time on administrative post-sales tasks, they will be freed to invest in data science and other services for optimizing media budgets.

Programmatic TV also offers greater planning flexibility in tighter time frames. One agency reported to WideOrbit about an advertiser that wanted to “heavy up” on TV in 10 local markets. When local spots could not be negotiated or secured quickly enough, the ads ran instead on a national cable network — a wasteful solution when the goal was to reach just 10 markets. If this advertiser had used a programmatic platform, its time to buy spots in 10 markets would have been reduced from days to a few hours.

Additionally, programmatic TV delivers greater transparency for everyone in the buying chain. This is no small thing at a time of deep concern among marketers concerned about improving oversight of ad pricing and placements. Programmatic TV platforms can give agencies and marketers a full accounting of how the budget was spent, exactly where ads ran, and what fees were charged along the way.

Not all programmatic platforms offer the same levels of transparency and accountability. Marketers should make sure their media buying partners use a programmatic TV solution that supports full transparency and prevents arbitrageurs from adding “ad tech taxes” to media buys.  

Programmatic TV Today

It’s obvious why marketers should be excited about programmatic TV: they know TV works, and now they have new access to a pool of inventory from local broadcasters that’s proven efficient and effective. They should also love the greater transactional transparency and the ability to target the right audiences and reduce waste.

The best programmatic TV platforms are capitalizing on their learnings to offer other linear ad inventory sources through their software like cable networks and radio stations. As a result, marketers get not just the benefit of infusing data and automated transactions, but can be among the first to run true cross-platform campaigns across linear and digital media.  

Programmatic TV platforms mean that the digital marketing discipline of “Test, Learn, Optimize” can now be applied to all media buying. The next step will be campaigns where linear TV and radio spots are planned, targeted, and purchased alongside all other media. Marketers who engage with programmatic TV today will be in the vanguard of this exciting evolution of media planning.