Programmatic TV, regarded as the next great disruptive force in digital advertising, is projected to reach $10 billion in 2019, according to Magna Global. The vision of programmatic is that all inventory — including TV, desktop and mobile video — will eventually be purchased from a single interface, allowing for more precise targeting, more efficient media buying and improved reporting.
So what’s holding back programmatic TV, while programmatic video is growing so quickly?
Challenge 1: Confusion about programmatic TV’s true definition. As we saw in the early days of programmatic display, despite increased industry interest and new technologies, programmatic TV isn’t well understood by marketers. In turn, they are hesitant to adopt this new method into their overall media buying strategy.
To combat this, the industry first needs a common lexicon to understand and appreciate what programmatic TV really encompasses. Here’s a start at defining some common language:
Linear: Traditional television that runs 24-hours a day rather than on demand. Advertising is purchased upfront and accounts for the majority of the $70 billion TV industry.
Addressable: Local buys served through cable operators’ set-top boxes, allowing marketers to target certain household demographics. While the percentage of households reached through addressable TVs is less than 30%, it is growing, allowing advertisers more granular targeting.
Over-the-top (OTT): Content delivered via the Internet rather than a cable or satellite provider, including standalone offerings (HBO Now, Hulu, etc.) plus those tied to hardware (e.g. Chromecast, Fire TV).
Programmatic TV: The automation of audience-based TV advertising through a software platform. While there are current opportunities for programmatic buying and selling in addressable and OTT, we are far from an end-to-end solution that allows advertisers to buy linear television in the same way they can buy online video.
Challenge 2: limitations of existing technology infrastructure. While the industry has moved forward with more advanced software-driven audience buying for traditional TV, real-time bidding (RTB) in the linear TV environment is not viable today. The “programmatic TV” buying that is happening typically involves workflow automation more than real-time auctions, and happens in private marketplaces with limited volumes of both inventory and buyers.
Technology that allows advertisers to identify an audience, buy an impression and traffic the ad to a specific household in real-time has yet to emerge. It’s not as simple as repurposing the existing online video infrastructure. And while pieces of the technology stack exist today, they need to be standardized and connected in order for this vision to come to fruition.
Challenge 3: The status quo: current behaviors and incentives. After we develop a shared understanding and have a robust technology stack in place for programmatic TV, we must create a thriving market by changing behaviors. Today, there’s less incentive for networks to change their selling behaviors until advertising dollars begin shifting to programmatic channels, promising more revenue and not just efficiency. Additionally, big broadcasters don’t want to see their advertisers reduce spending from $10 million to $1 million because programmatic allows the advertiser to eliminate wasted impressions. As a result they are reluctant to make inventory readily available through these platforms.
There is also trepidation from global brand advertisers who are trying to reach large audiences. While they may see enhanced targeting, buying and reporting, they may end up spending more to reach certain audience segments programmatically compared to negotiating large, traditional up-front buys. In these cases, the benefit of scale may outweigh the benefit of more precise targeting.
Overcoming these obstacles and giving advertisers and networks a true holistic video marketplace – one that encompasses TV, mobile and desktop – will forever change the landscape of advertising. An all-encompassing marketplace kicks open the door to full-funnel attribution, and gives advertisers the tools that they’ve only dreamed of for the past half-century. But before this dream becomes a reality we must address confusion, technology and incentives.