By Gerry Sutton, CEO, Adstream
Programmatic technology — the class=”markup–anchor markup–p-anchor” rel=”noopener” target=”_blank”>small percentage of the market today (4% of TV budgets), it stands to capture 17% ($10 billion) of the market by 2019.
So what are the benefits? Data-enabled targeting to drive greater campaign performance. In addition, programmatic makes deals happen faster.
But while programmatic TV offers so many exciting opportunities for the ad industry, it still has its share of challenges.
Advertising has been slow to embrace programmatic TV.
The advertising industry as a whole has lagged in adopting programmatic TV. This past year, programmatic made up just one percent of the total TV ad spend in the U.S. — a number that’s projected to reach only six percent by 2018, showing a slight increase. And this isn’t because advertisers aren’t open to change. Some are just taking longer to fully understand the benefits and why it’s worth taking seriously as a worthy option.
Another reason for this slow start is that broadcast and cable networks are reluctant to make inventory available to programmatic buyers. They worry that data-driven advertising will commoditize inventory and lower the price of premium TV ads. In addition, TV networks aren’t rushing to alter their advertising methods because they’re still able to successfully sell much of their inventory through guaranteed, upfront deals. We’re seeing a similar situation for OTT. Only a small portion of OTT inventory is currently sold programmatically.
Staying relevant as digital advertising continues to grow.
TV ad buying deserves the same degree of efficiency, transparency and science as online or digital. But while there’s no doubt that TV programmatic advertising is continuing to grow, it pales in comparison to what’s currently happening on the digital side of the equation. More than half of all online display spending in 2015 went to class=”markup–anchor markup–p-anchor” rel=”noopener” target=”_blank”>only 4% of TV advertising budgets went to programmatic that same year. Similarly, the adoption of programmatic video has taken off. 60% of digital video ad spend in the US will be facilitated via programmatic in 2016.
In general, digital is outpacing traditional TV because of the many benefits it affords advertisers: easier transactions, more targeted, personalized campaigns and better ad measurement. However, these same benefits can be enabled in the linear TV environment through programmatic technology.
According to an eMarketer report, 58% of respondents believe that targeting audiences more precisely is programmatic TV’s most important benefit. That same report also found that 13.5% felt the biggest benefit was lowering CPM, while 10% said that programmatic TV makes it easier to buy different kinds of TV inventory.
Broadcasters will have to buy in.
Programmatic adoption has been hampered by a lack of broadcaster buy-in. National networks have withheld inventory from programmatic exchanges because they fear that programmatic will ultimately drag down pricing. The same is occurring in OTT. Content creators have had little incentive to embrace programmatic, opting to sell untargeted impressions at a high price. Yet programmatic offers some real pricing advantages; by pairing undervalued and undersold inventory with granular audience data, broadcasters can sell at higher rates to advertisers.
So, 2017 will be a pivotal year for programmatic TV’s future. More national broadcasters will have to embrace the technology to make it a viable long-term growth area. And some broadcasters are taking their advertising efforts to digital video audience to boost ratings as broadcast viewership declines. The hope is that those broadcasters who have already adopted programmatic will see the benefits across undervalued inventory, boosting interest across the ecosystem.
With programmatic TV gaining momentum, it’s important to address what the future holds for this increasingly popular method of advertising. This will help advertisers better understand all the benefits of programmatic TV, and why it belongs in the same category as digital.
Gerry Sutton is the CEO of AdStream, a powerful advertising platform helps brands and agencies manage the creation, optimization, storage and delivery of their content. The leader of the Adstream team, Sutton joined the company in 2013 after a long association with the company going back to 2004. Sutton brings a considerable depth of experience in complex operating environments and IT and systems architecture, essential to leading Adstream to continued success.