Budgets allocated for programmatic TV buying, as well as the average cost of programmatic buys across platforms, are expected to surge over the next few years, according to the latest report from IPG Mediabrands' Magna Global.
Programmatic TV -- in this case defined as all spending transacted through a technology platform rather than a traditional insertion order – will represent 4% and $2.5 billion of U.S. TV budgets in 2015, the company reported. That sliver will increase to 17% and $10 billion of TV budgets by 2019, according to Magna Global.
"While the U.S. programmatic TV market, where most of the experimentation and development is happening, is still very small (2-3% of TV budgets in 2014), it is expanding," the report says.
"It's nascent and can only grow from here," Vincent Letang, exec VP-director of global forecasting for Magna Global, said in an e-mail. "TV, and other electronic media such as digital out-of-home, can use some of the technologies and data used by digital media formats to develop programmatic/automated trading, audience buying and advanced targeting."
Magna breaks programmatic TV into two categories: audience buying, which represents the majority of programmatic TV and reaches over 95 million households, and "household addressable," which reaches over 30 million households and "will become a significant portion of the total in the near future," the company said.
The company defines the household addressable method of programmatic TV buying as a way to target demographics via local buys served through cable operators' set-top boxes.
Audience buying is more broad, as Magna Global defines the term: It's focused on targeting specific consumers using audience data wherever those consumers may be watching TV. It's not necessarily dependent on serving ads through set top boxes.
"Household addressability, for instance, is about to take off when more MSOs will activate set-top-box-based software to be able to target a larger sample of their subscribers with live linear substitution commercial," said Mr. Letang, referring to cable and satellite companies. "All major MSOs have plans to make that happen in the next two years and once the solution is available through most MSOs it will generate more interests from more advertisers, national or local."
Growth for programmatic TV comes on the heels of a good year for average programmatic ad rates across platforms, according to Magna Global, driven by "an influx of higher quality inventory."
Programmatic video is already approaching one-third of total digital video spending in the U.S., and will represent over two-thirds of total video spending by 2019, the company predicted.
"This trend will continue as publishers grow more comfortable offering inventory programmatically," the company predicted.