- Programmatic TV advertising market size
- The Programmatic TV players
- Open auction vs. private marketplace
- Programmatic TV vs. Addressable TV
- The right Programmatic TV buying strategy for TV advertisers
- Demographic Buying, Index-based Buying, Engagement-based Buying
- Recommended further reading
TV advertising today focuses around trying to reach your target demographic based on TV panel data of a few thousand households. The ad currency for that is the gross rating point (GRP) – a maximum GRP at a given budget being the aim for a TV campaign. TV planners identify the shows with the highest GRP for a set target demographic based on historical viewing data and then book the shows with the best price/cost ratio, maximizing the GRP for the planned campaign.
Programmatic TV is set to change this in two ways: First, Programmatic TV puts a layer on top of today’s TV trafficking and booking system, allowing to automate the buy, minimizing the need to manually touch bookings and thereby decreasing booking costs. Second, Programmatic TV goes for a data-driven approach beyond standard target demographics. Instead of using a few thousand TV panel households, it leverages set-top box data of millions of households, allowing more granular targeting. In addition, this data is married with other household data, e.g. allowing to identify viewers who are interested in buying a new car. The difference to Programmatic Digital is that automated buy does not happen in real-time but with a minimum one week lead-time.
Programmatic TV advertising market size
The total TV advertising market size is about $200 billion worldwide, accounting for about 40% of all ad spending. IDC expects Programmatic TV ad spend to be around $17.3 billion worldwide by 2019. For the US, the overall TV market size currently is about $70 billion, with Magna Global estimating $10 billion for Programmativ TV advertising by 2019. This essentially means two things:
First, Programmatic linear TV spend will be the same size as the entire online video spending combined.
Second, with well below 10% of total TV spending worldwide and 17% in the US, it still has potential for massive growth. With programmatic online spending breaking through the 50% market share in 2015, it may well be that the IDC and Magna Global numbers turn out to be rather conservative estimates.
The Programmatic TV players
- The TV advertisers / media agencies who book campaigns.
- The demand side platforms (DSP) who act as programmatic buying platforms (e.g. Tubemogul, TheTradeDesk, Videology…), mainly fulfilling two functions: Marrying data from DMPs (see below) with the available inventory and then executing the buy in an automated way.
- The sell or supply side platforms (SSP) who act as programmatic selling platforms (e.g. Wideorbit, AudienceXpress, Clypd, Placemedia, Videa…). These platforms integrate into legacy TV systems for each network to make the automated buy technically possible.
- The data management platforms (DMP) such as Rentrak, who layer audience data, engagement metrics, purchase data or other sources on top of the TV program to allow smart buying decisions.
- The publishers / TV networks who supply the inventory.
Most prominent Programmatic TV players (Wideorbit survey 2016)
Open auction vs. private marketplace
With programmatic online starting as an open auction market where anyone could bid for the inventory, one of the fears for the nascent programmatic TV market is that the auction model will become a race to the bottom in terms of pricing similar to what happened online. While there are many arguments against this happening (TV having limited inventory to begin with), many TV networks are moving slow on the auction model and instead setting up sales deals via private marketplaces directly, similar to what is increasingly happening in the online programmatic world. As these deals are negotiated directly between the buyer (agency) and the seller (TV network), it allows tighter controls on pricing while keeping the other advantages of programmatic TV in place (automation of the buy, data enrichment etc.). That said, Programmatic TV is not about getting cheaper inventory. It’s about getting the right inventory for the advertiser, thereby optimizing the buy and getting more out of a given campaign budget.
Programmatic TV vs. Addressable TV
Whereas Programmatic TV in general works on top of the current linear TV slot, Addressable TV allows to insert ads on the household level through special set-top boxes, targeting individual households (more information here). Currently Addressable TV can target about 25-30% of US households, as it requires newer set-top box models. As Programmatic TV is about (1) automation and (2) advanced targeting through data, Addressable TV in wywy’s opinion is a subsection of Programmatic TV, fully leveraging the targeting options down to the household level.
The right Programmatic TV buying strategy for TV advertisers
Programmatic TV first of all requires a change in mindset. As TV advertising has been handled the same way for the last 60 years, changing this way needs to be a conscious choice, driven by both the advertiser and the agency. The advantage of Programmatic TV buying lies in using the newly available data part and then leveraging the automation part to do a more granular and continuously optimizing buy. If GRP is your metric of choice, the advantage of Programmatic TV buying is very limited. The most important benefit is better audience targeting, according to a recent poll by Wideorbit:
As Programmatic TV allows you to define success metrics beyond the GRP, the initial step is to decide which success metric is the right one for the particular TV campaign you are planning: Is it a reaching a very specific target audience, driving social chatter, or maximizing purchases ? Choosing a new success metric also means letting the old success metric go. While you can report on several metrics simultaneously, you can only maximize one metric at a time.
As the TV budget often is the major part of an advertising budget, an appropriate entry point could be to start tracking the additional metrics and reporting them alongside the GRP. This allows the advertiser to get a fuller picture of the TV campaign, helping make it more accountable and gaining a better understanding of the value compared to digital campaigns (where almost everything is tracked).
Demographic Buying, Index-based Buying, Engagement-based Buying
Traditionally, TV campaigns are planned around a demographic target group using the GRP and then inventory is bought by trying to maximize the GRP with a given budget, or reach a target GRP with the minimum ad spend needed. With the introduction of data metrics beyond demographics, more and more campaigns are using different success metrics such as secondary guarantees or engagement metrics:
(Traditional) Demographic buying
Most campaigns are planned and bought on gender & age demographics, based on the Nielsen TV panel. Once the target demographic is defined, the programs with the highest reach and the best price within that target demographic will be bought. TV’s unparalleled reach helps to positively influence the advertiser’s brand.
The traditional approach has limitations as it relies heavily on Nielsen’s TV panel with a couple of thousand households and partially outdated technology, such as keeping physical TV viewing diaries.
New set-top boxes allow to capture the viewing habits of millions of households in granular detail. Combining this massive set of viewer data with other available data sources allows to build detailed viewer profiles at a very granular level, going way beyond the traditional gender & age demographics. Household income, family status, hobbies, food preferences etc. can be used to better define and reach the desired target audience. Instead of ranking the TV program based on the gross rating point, the new index-based buying approach ranks the TV program based on the chosen targeting metrics for each individual campaign. So while a show might have a low “traditional” rating, it might have a high index value and therefore be bought based on the new targeting metric. One caveat remains: If the network agrees to a guaranteed index-based audience, it will require both advertisers and networks to agree on a standard for the used targeting data.
The rise of the “always on” culture has lead to almost all viewers watching TV and using their smartphone or tablet as a second screen in parallel. This change in viewing habits results in many viewers engaging with TV ads immediately following the airing, blurring the traditional boundaries between brand and direct-response TV advertising. More and more TV advertisers are starting to measure the impact of their TV advertising on their online channels. These impact metrics can be used to rank the TV program based on people who are highly interested and most likely to engage. The advantage of this approach is that there is no need to predefine the audience as the viewers’ engagement is the relevant optimization metric. However, as engagement comes first, the challenge is to combine this with the advantage of TV’s broad reach for branding to less interested viewers.
While Programmatic TV is still a nascent technology, many “digital first” players are already moving into this market. Coming from the digital world, they are used to and expect more accountable metrics, allowing them to make efficient buys. Using available data allows them to continuously optimize on a “channel” that has unparalleled massive reach and no viewability or fraud issues.
Recommended further reading:
- Tubemogul Programmatic TV overview (free white paper)
- WideOrbit Programmatic TV Insights Survey (free white paper)
- Forrester report (paid brief)
If you are interested in a Programmatic TV campaign, contact:
Dr. Andreas Schroeter
Tel.: +1 (647) 877 0740
How Programmatic TV is changing the ad currency