If you buy digital ads, chances are you spend a large percentage of your budget on programmatic. In less than a decade, programmatic's share of digital has grown to more than two-thirds of all transactions.
Now programmatic has arrived for TV. Just as in digital, it's set to be a huge asset for media buyers because it brings two major benefits to the table: automation of ad sales processes and tools for using data to improve targeting and measure results.
Programmatic transactions are currently just a sliver of the total TV ad market. But the growth will be fast and furious. MAGNA Global projects programmatic TV will make up 17%, or $10 billion, of U.S. TV ad revenue by 2018.
The technology that will fuel that growth is here today and fully operational. Programmatic TV platforms are available right now that allow buyers to import data to identify and target fragmented audiences and improve campaign effectiveness.
Local TV Poised to Fuel Early Transactions
What's the low-hanging fruit of programmatic TV for buyers? History offers some clues.
Digital programmatic mushroomed because it made it simple to aggregate specific audiences across thousands of websites. Its early adopters forged their institutional knowledge of programmatic into a competitive advantage for their brands or agencies.
If the main growth driver of digital programmatic was the ability to unlock value from a fragmented landscape and create competitive advantage, where can we expect it to catch fire first in TV? The part of the TV ecosystem that looks most similar to digital display in the late 2000s is local broadcasting.
If you only think of local TV as news, syndicated shows and local programming, you couldn't be further from the truth. These stations sell spots on the same super-premium programming as the national networks—everything from live sports and prime-time programming to late night and the big morning news shows.
Programmatic TV opens local broadcast TV as an efficient option for advertisers. Running a spot in twenty 20 media markets used to require contacting two to four stations in each market just to start the process. Now a keystroke can complete every step of a single transaction that secures airtime on dozens of stations.
By definition, local broadcast offers greater geographic focus than national buying. Combining it with programmatic enables more efficient targeting by media market, which digital buyers have enjoyed for years. It brings the virtues of SEM to TV planning.
There is no question that national networks are a compelling solution for most national brands, but many campaigns don't need to go national to accomplish their goals. Take the example of Bank of America. Lou Paskalis, its SVP-enterprise media, views programmatic buying as a way to make television work for advertisers when national is inefficient. In WideOrbit's white paper on programmatic TV, Mr. Paskalis says, "[Programmatic TV] is really exciting because it's like opening a channel that's been closed. I can engage Merrill Lynch high net worth customers on a household level across 15 markets. Those 15 markets are probably 70% of Merrill Lynch customers."
Programmatic buying of local TV also offers budget flexibility. Instead of locking into a national commitment months in advance, spots can be purchased as little as a week ahead of airtime.
Mike Racic, president, media operations, at iCrossing, agrees that the freedom to capitalize on local opportunities charges his interest in programmatic TV. "Local allows you to control your destiny. We need to react to what is happening in the marketplace," he says in the WideOrbit white paper. "When sales are down in a particular dealership, I can heavy up in that market."
Finally, programmatic makes it possible to execute media plans where TV is purchased alongside digital video, opening new possibilities for extending campaigns and reaching target audiences across screens.
And just like in digital, the first movers in programmatic TV are finding that TV is now a medium where they can easily apply the digital discipline of Test-Learn-Optimize.
The day is coming when TV has a true data backchannel. When that happens, it's likely that all media will be bought and sold on comprehensive parameters. "To me, it's not a matter of will it be programmatic or not," Mr. Racic says. "In two or three years, this is just how people will transact in all media on a global scale."
The platform convergence for video advertising is on. Those who take the lead in programmatic TV today will be the future leaders of this brave new space.
About the Author
Eric R. Mathewson is the founder and CEO of WideOrbit, the leading provider of advertising management solutions for media companies. Since its founding in 1999, WideOrbit has grown to be the media management platform of choice for over 70% of U.S. television stations. Prior to WideOrbit, Eric was a portfolio manager at Montgomery Securities and managed equity derivatives at Kidder Peabody.
About the Sponsor
WideOrbit is the leading provider of advertising management technology for cable networks, local television stations and radio stations. More than 3,200 broadcasters and networks leverage WideOrbit solutions to streamline operations; maximize revenue from traditional, digital and programmatic channel; and extend their business across distribution platforms. Our clients include Entercom Communications, Entravision Communications Corp., Gray Television, Meredith Corp., NBCUniversal, The E.W. Scripps Co. and Tribune Media. WideOrbit is headquartered in San Francisco with offices across the United States as well as in London, Paris and Gothenburg, Sweden.