How programmatic could shift TV’s balance of power
The power has long belonged to sellers in the buyer-seller relationship
June 6, 2016
Everyone knows programmatic buying will be the future of media, whether it’s TV or radio or out of home. But one thing that’s talked about less is why this is a good thing for media buyers, beyond the time savings. There’s one excellent reason: It takes back the power from TV sellers. They’ve long been able to push advertisers into paying higher prices and making quicker decisions because of perceived high demand and scarcity of inventory. However, with programmatic, you can’t create high demand. It’s there or it’s not, giving buyers a better sense of what’s actually happening in the marketplace. They’re no longer pushed into fast decisions. Brad Bernard, vice president of digital strategy and innovation at Harmelin Media, looked at this issue and more in a recent report on the state of programmatic television. He talks to Media Life about the balance of power in negotiations, why local stations have been slow to embrace programmatic, and why automated buying will never entirely replace in-person negotiation.
Generally speaking, what are the benefits of PTV, and also what are the potential drawbacks?
In general, the benefit of PTV is a balancing of the market conditions that govern sellers and buyers.
For too long, the balance of power in the TV marketplace has been held by the seller. They constructed an artificial marketplace in the TV upfront to scare advertisers into pre-purchasing ad time, often with inflated costs versus the value.
In a PTV environment, we can be more precise in our targeting, more discrete in the purchasing and more timely in our decision making.
This does not mean that there is going to be a catastrophic decline in pricing, but it does mean the pricing will be more appropriate to the market value. Inventory and audiences that are in low supply and high demand will command a premium price — maybe even higher than what we are paying now. But marketers and agencies won’t be forced to buy less desirable TV programming just for the right to buy what they really value.
Also, while PTV has the potential to commoditize the 30-second spot, agencies and marketers will need to shift more of their efforts to develop more innovative communication platforms that add incremental value.
Was there anything you found surprising or particularly interesting when putting together your research?
There seems to be a large chasm on the supply-side in regards to programmatic TV. On one hand you have very large, national players leaning in heavily. Cable networks and broadcasters like NBCUniversal are embracing the shift by opening large inventory pools to programmatic buying platforms.
On the other hand, local broadcast stations seem to be vigorously resisting the shift. While the technology is in place to make PTV scalable at a local level through companies like WideOrbit, the local stations are very slow to make their inventory available.
I think that the resistance by local stations could be a fatal mistake on their part. Technology will always find a way to circumvent artificial obstacles. They will either be part of the evolution or be left out.
What is the most important thing media buyers and planners can take from this?
The shift to programmatic TV is happening and the momentum is so great that large-scale adoption is an inevitable reality. At the same time, it’s very unlikely to completely replace the current model of buying and selling TV.
This is going to make the jobs of buyers and planners even more complex as the landscape continues to fragment. It’s critical for buyers and planners to develop new skills to keep pace with the changing industry.
This is especially true as the definition of TV changes and cross-screen viewing is now the norm. Planners and buyers must now take a holistic view of video consumption and understand how these new viewing habits intersect and diverge. Just as important, we need to understand the different currencies, targeting techniques, delivery systems and technology platforms.
You note that 4 to 5 percent of all TV buys last year were programmatic. Looking forward, what percentage of TV buys will programmatic plateau at, and when do you foresee this happening?
There are two ways to look at this question. There’s a front-end application and a back-end application of programmatic TV. The front-end application has more to do with how agencies and marketers automate the practice of planning and buying TV. In this case, there are probably some practical limits on the adoption of PTV. This is in part due to general inertia. Old habits are hard to change, but that is only a small obstacle.
The bigger obstacle to 100 percent adoption is that there will always be a need for buyers and sellers to collaborate on custom promotional programs such as sponsorships, brand integrations and product placements.
The 30-second spot is still a powerful marketing device but its effectiveness continues to decline as technologies continue to allow consumers to avoid and skip the ads.
As a result, I don’t see the front-end application of PTV surpassing 50 percent anytime soon. However, back-end application could soar.
By back-end application, I mean that the suppliers, aggregators and other intermediaries are deploying this technology very quickly to streamline outdated back-office operations. So, while the majority of TV transactions may continue with the traditional face-to-face negotiations, the vast majority of those buys will eventually be executed using programmatic technology.
What are some of the pros and cons of new advanced targeting?
There are some obvious advantages of advance targeting. The biggest advantage is the opportunity to eliminate wasteful spending by only paying for prospects that you want to reach. It also opens the door for personalized messaging so that advertisers can customize promotions and commercials that are tailored to that specific individual.
That said, there is a big danger of over-targeting. While we may think we know exactly who our target is, consumers rarely fit into a nice, neat bucket. By “eliminating waste,” you may be ignoring large segments of prospective customers.
How receptive are viewers to addressable TV ads? Is that a potential problem in terms of growth potential?
I don’t believe that viewers have a large objection to addressable TV ads, but they are concerned about how the data is obtained and how much control they—the viewers—have over their personal information. Marketers need to be careful not to violate the trust of their customers. The best way to do this is to give more control into the hands of consumers.
I eventually see a day when consumers will have the option to either share some personal information in exchange for fewer, highly targeted ads or remain anonymous while receiving more, less-relevant ads. There has to be a value exchange between consumers and marketers when it comes to the use of data.
You mention that inventory limits are a current limitation of PTV. Could you expand on that? What types of inventory are typically available for PTV, and how does that vary by network?
The space is pretty fragmented but the two primary sources for inventory are national direct feeds and local avails for national coverage.
The biggest limitation of inventory is from the national direct networks (i.e. A&E, Discovery, Viacom, etc.). These networks are being very cautious and slowly dipping their toes into PTV because they are unsure about the overall impact on revenue.
For example, Viacom is letting clients buy “data-driven” ad schedules, but they can only do so by going directly through Viacom, not through a programmatic platform. NBCU is allowing access to broad inventory pools but by invitation only through some select DSP platforms, like TubeMogul. Other cable networks are also allowing DSPs to access their inventory, but tightly controlling pricing and restricting inventory to programming and timeslots that are historically undersold or what they deem as undervalued.
Most of the inventory that is being bought and sold programmatically today is inventory through local avails of the cable networks. The lead player in this space is AudienceExpress, who is also connected to the TubeMogul platform. Even so, AudienceExpress is only offering the local avails on a national scale. Advertisers cannot select specific local markets. This is essentially a reinvention of the unwired network, but with more audience targeting capabilities.
You say it could be some time before real-time bidding hits TV. What are some factors that either speed up or slow down this process?
For true real-time bidding to occur, we need a much more robust TV ecosystem that allows marketers to identify individuals within seconds of the commercial airing. There are three main parts of this ecosystem that need to be developed.
First is the ability to identify individuals with addressable TVs. This is beginning to roll out, but it is still several years away before hitting sufficient scale.
Secondly, we need large-scale marketplaces of multiple suppliers to form. Currently, the marketplaces are very fragmented, and most are still one-to-one relationships between buyers and sellers.
Lastly, the ad delivery systems need to be overhauled. In a real-time environment, ads need to be delivered in seconds or micro-seconds. This requires cloud-based delivery of ads to the home. The bidding technology is available, but the infrastructure to leverage it in television is not quite there yet.
From a media buyer’s standpoint, what would be an ideal currency for PTV? Do you see the Nielsens or comScores of the world heading this direction?
This is a huge debate, and there are multiple sides of the argument. Many are pushing to currencies that are closer to the standards in digital marketing, where we have guaranteed CPMs based on specific targets. These targets can be behavioral profiles, contextual profiles, product usage profiles and even location data profiles.
It sounds logical, but there is growing skepticism about the data used to develop those profiles. While it may be good for targeting, it may not measure up to the standards of a currency.
As a result, we have seen the pendulum begin to swing back to currency based on demographics that are more easily verified. In the end, the form of the currency is not the most important aspect. The critical need is a currency that can be used across platforms and be accurately validated by an accredited third party.
I think both Nielsen and comScore are in good positions to provide this, and it is going to be a tight race to see who can get there first. In my opinion, Nielsen has an obvious head start.
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