Market View

How Programmatic TV is changing the ad currency


Today’s TV ad buy relies on Nielsen’s TV ratings in the US, an independent third-party and industry-accepted metric serving as the currency between buyers (advertisers) and sellers (broadcasters). Although there have been many discussions whether TV ratings are correct, whether there are more accurate ratings out there etc., fact is that the industry players do not really want any change. An agreed upon single currency simplifies everything, even if might not be state of the art after being “invented” in 1950. The upfronts nowadays determine a lot of the TV ad spend for the year, buyers getting discounts in return for spending commitments. The different TV campaigns will then be allocated to best fit the target group within the given spending commitment constraint. From a single campaign perspective not the ideal way of allocating spendings, but from an industry perspective more income security in return for discounts makes sense.

The rise of Programmatic TV: Bye, Nielsen currency.
Enter Programmatic TV. No upfront deals, rather instant booking. Unfortunately no bulk discounts (today) but a technology allowing to automatically optimize target audiences and thereby getting more out of a single given campaign budget. A great tool for advertisers who don’t enjoy the bulk discounts due to large “booking quantities”.

But this is only the beginning. Programmatic TV allows advertisers to define their own success metrics for optimization. Currently the focus is still on the “old” currency target audience. What, if this target audience metric becomes obsolete? Advertisers used to book in the Vogue magazine or on vogue.com because they wanted to target fashion-interested women. With the rise of programmatic online advertising the attention switched away from the website towards the user – advertisers want to engage with interested users, not with a particular surrounding. They can do that because online advertising allows to track the performance of the ad. So why should a TV advertiser not book TV slots which trigger the most social comments on Twitter and Facebook? Why should a TV advertiser not book TV slots which results in the most website visits? Or mobile app downloads? Or even offline store purchases?

500+ million spendings: Hard to ignore
This year’s superbowl saw three mobile app gaming companies promoting their products. Suddenly, entirely new players pour hundreds of millions into the TV ad industry with the clear goal to get viewers to download their game. And it works really well. But they do not care if the game is played by a 23 year old college student or 45 year old office worker. Forget about brand building (which cool other game from Zynga did you play after Farmville?), they care about downloads but have to pay in “target audience” currency. This will change soon, the first step being the “translation” of the current currency into the cost-per-download currency through TV attribution. Appsflyer, a mobile app install tracking company recently announced its industry-first TV attribution tool. The next step will be to use this information instantaneously to buy TV slots on cost-per-download level. And that’s when Programmatic TV will explode, when TV advertisers define their own success metrics on a campaign basis with immediately visible results.

Welcome to the new world of Programmatic TV advertising.

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Tobias Schmidt