For the first time this year, more than half of digital display advertising spending will be transacted programmatically. The practice of media trading with RTB, private marketplaces and other programmatic channels has become commonplace as both advertisers and publishers treat display as a commodity.
But it wasn’t always this way.
It took more than a decade for key players to overcome major hurdles to reach this point, from publishers battling depressed pricing to advertisers needing higher-quality inventory. The industry hasn’t completely solved all challenges but the programmatic buying and selling of display advertising has reached a moment of broad adoption, acceptance and stability.
The same can’t yet be said of a programmatic TV. Many of the problems that plagued programmatic display now constrain the growth of programmatic TV, contributing to the reluctance of advertisers and television networks to explore this emerging medium.
There’s little doubt that some form of programmatic TV will eventually take hold, but the industry must understand and solve for these pain points before programmatic TV hits its own inflection point.
Expanding Beyond Remnant Inventory
Programmatic selling first emerged as a solution for publishers to offload the display inventory they couldn’t sell directly to advertisers. Getting some value for unsold placements was often better than running a house ad or letting the impression go unsold. However, big brand buyers wanted more premium ad space – ad space that publishers were afraid to give up at a potentially depressed price.
This led to the development of private marketplaces where publishers could set specific floor prices for their premium inventory and have more control over buyers and bidding dynamics. In TV, networks need to adopt a similar strategy and work with their key advertisers to establish marketplaces where these advertisers can compete for impression-based ad space, keeping prices at a premium and allowing trusted brands access to a variety of inventory similar to what they already buy directly.
Encouraging Reluctant Premium Sellers
Even as more websites opened up more inventory to programmatic channels, premium publishers, including The New York Times, USA Today and ESPN.com, refused to sell any inventory programmatically until it became clear that their advertisers wanted to buy this way.
For holdout publishers, it quickly became apparent that they had to adapt. By that time, they were playing catch-up when hiring staff and building technology, which they unfortunately had to do quickly to facilitate shifting buying preferences.
Networks now worry their inventory will be undervalued if sold programmatically, but they risk being left behind if they don’t start exploring and laying the groundwork for a new era of television buying and selling. In a reversal from their programmatic display days, ESPN has been one of the first networks to experiment with selling TV spots programmatically, selling 30-second spots for SportsCenter in December and building in-house technology to facilitate this type of trading.
To avoid depressed pricing, the network focuses its programmatic efforts around times of high demand, including the day after the Super Bowl.
“Programmatic doesn’t equal cheap,” Eric Johnson, EVP of global multimedia sales, told The Wall Street Journal in December. By taking control of its own inventory and when and where it is sold programmatically, the network will be ahead of its peers in pricing and offering the tools buyers will need in a quickly growing market.
Managing Sales Compensation
Attributing sales made through programmatic channels to an actual person was an early challenge in display. Some sales executives worried that machines might make their jobs obsolete, and in environments where there was no commission incentive, pushing programmatic was a non-starter. Vocal salespeople, with personal relationships with key buyers, became detractors rather than champions of this new technology.
Compensating salespeople no matter what channel a deal came through, as Bloomberg and The New York Times did with display, helps programmatic become more accepted and grow quickly within an organization. As a guideline, the IAB white paper, “Building a Programmatic Sales Capability,” details the stages necessary to make this structure a reality.
Though focused around publishers, the document provides the progression that TV networks could take as well, starting with building the ad operations capabilities needed to offer programmatic and progressing to building out a full-blown programmatic team that can consult and aid the rest of the sales team.
Just as in publishing, TV needs to take on a client-focused strategy for programmatic sales by encouraging sales teams to do what they do best: developing face-to-face human relationships and consulting on the right mix of channels that best serve each client and campaign, regardless of the buying method.
Easing Inventory Cannibalization Fears
In part, publishers initially protected their inventory from programmatic channels to avoid having inventory that would have otherwise been sold directly. Why would an advertiser buy at a $25 CPM when it could get the same inventory at a $5 CPM in the open market?
Again, programmatic private marketplaces allowed publishers and buyers to meet in the middle, giving the same buyers access to premium inventory programmatically, in real time, without compromising that revenue for publishers.
As TV buyers hold back more of their upfront budgets, in terms of the amount reserved to buy time against upcoming fall or spring TV shows, networks would be wise to create private exchanges where their traditional buyers have the opportunity to compete and spend against specific audience data.
Television will face its own unique set of challenges for building a true programmatic marketplace. But the more players can learn from the mistakes of display, the faster TV will become an essential way for networks to build new revenue sources and for advertisers to find the targeted audiences they need.
Why repeat the mistakes from the past? Let’s learn from them.