stay tuned programmatic tv is up next - Digiday

STAY TUNED PROGRAMMATIC TV IS UP NEXT

TABLE OF CONTENTS

3

Introduction

10

Who’s holding the checkbook?

4

Hang on a second… What is programmatic TV?

11

Telling it like it is, even on TV

5

Stocking up on TV inventory

13

Coordination is key with the rise of programmatic

7

Saturation may be low, but spend is on the rise

14

Conclusion: So why the wait?

In 2007, the United States began a mandatory transition from analog to digital TV; it will be completed in 2015. Connected TVs are taking the market by storm, and video is ubiquitous, wherever and whenever consumers can be reached. The stage is set for a programmatic takeover of the TV landscape. “The power is in moving our clients beyond targeting broad demography, beyond adults 25 to 54,” said Matthew Kramer, programmatic video lead at 3 / STAY TUNED PROGRAMMATIC TV IS UP NEXT

Omnicom. From the ad slots to the metrics, automation is on advertisers’ minds, and rightly so. The ability to serve ads efficiently and flexibly to very precise audiences is a dream come (nearly) true. By surveying 465 industry professionals, Digiday, with our partner The Trade Desk, took a look at what the market is like today, what’s still standing in the way and how programmatic TV will result in coordinated media plans across screens.

THE TRADE DESK + DIGIDAY

HANG ON A SECOND… WHAT IS PROGRAMMATIC TV? WHICH OF THE FOLLOWING FEATURES ARE ESSENTIAL TO YOUR DEFINITION OF PROGRAMMATIC TV? LIVE BIDDING PROCESS

46.2%

REAL-TIME DECISIONING

69.1%

REAL-TIME PRICING

58.7%

ABILITY TO TARGET WIDE VARIETY OF AUDIENCE DEMOS

77.7%

ABILITY TO PROGRAM MULTIPLE CREATIVE ASSETS

50.8%

OTHER

10.4%

One of the biggest challenges buyers and sellers face when it comes to programmatic TV is what it really means. So before we jump straight into the hard numbers, let’s define it: What are people talking about when they talk about programmatic TV? When defining programmatic TV, we do so by talking in terms of automation and addressability, and our respondents agree. By far, the most essential programmatic feature to respondents is the ability to target a wide variety of audience demographics with pinpoint accuracy. They’re over the days of probabilistic targeting, basing their buys on daypart and channel and hoping they’re hitting the right segment. Programmatic TV holds the promise of granularity when it comes to audiences, and anything short of this is going to leave buyers disappointed, as is evident from the 67 percent who say this is the most important benefit automating the process would yield. All other concerns are tertiary. Of course, flexibility is also important. Buyers don’t want to be locked into specific buys months, weeks, or even days in advance. That’s why they’re also looking for both real-time decisioning (62 percent) and real-time pricing (59) as essential components of programmatic TV. However, it is important to note that real-time pricing is more likely to occur further down the road as publishers get more comfortable with automation and audience targeting. 4 / STAY TUNED PROGRAMMATIC TV IS UP NEXT


STOCKING UP ON TV INVENTORY WHICH OF THE FOLLOWING TV AD SLOTS WOULD YOU BE MOST INTERESTED IN PURCHASING PROGRAMMATICALLY? 15-SECOND SPOTS

90.7%

30-SECOND SPOTS

97.6%

60-SECOND SPOTS

79.0%

90-SECOND SPOTS

20.6%

15 MINUTES

4.1%

30 MINUTES OR LONGER

7.9%

When it comes to the types of content and the ad slots advertisers want, it is clear that most buyers want ad choices in the :15, :30 and :60 increments, but 20 percent want :90 and 12 percent want long-form choices. Outside of length, respondents are looking for programmatic to offer both ends of the local/national and cable/broadcast spectrums, indicating a desire for both broad reach and segmentation, another nod toward the need for better targeting.

5 / STAY TUNED PROGRAMMATIC TV IS UP NEXT


STOCKING UP ON TV INVENTORY

ASSUMING THEY WERE AVAILABLE, WHICH TYPES OF INVENTORY WOULD YOU PURCHASE PROGRAMMATICALLY? LOCAL AFFILIATE BROADCAST

60.5%

LOCAL AFFILIATE CABLE

55.7%

NATIONAL BROADCAST

69.4%

NATIONAL CABLE

67.7%

PREMIUM/SUBSCRIPTION CABLE

47.8%

SET-TOP BOXES/CONNECTED TV (EG, CHROMECAST, APPLE TV)

58.8%

FREE OVER-THE-TOP (EG, HULU)

57.0%

PAID OVER-THE-TOP (EG, HULU PLUS)

48.1%

With the rise of streaming and connected devices and the associated addressability devices these offer, nearly 60 percent want to see connected device and streaming inventory made available programmatically.

27%


Don’t forget Upfront and New Front media: 27 percent of respondents are looking to purchase some programmatically this year.


SATURATION MAY BE LOW, BUT SPEND IS ON THE RISE 67%

If you think of programmatic TV in baseball terms, we are in the first inning. The automated future of TV inventory is ahead, but a quick glance shows that it definitely hasn’t penetrated too far into the programmatic market just yet: 23 percent of respondents are buying some portion of TV inventory programmatically today, but nearly 50 percent anticipate buying TV programmatically within 12 months.

FOR WHAT CHANNELS DO YOU BUY MEDIA PROGRAMMATICALLY? DISPLAY

85.6%

MOBILE

69.1%

SOCIAL

49.0%

VIDEO

67.1%

TV


A similar type of inventory, digital video, currently sees support from 67 percent of programmatic buyers. This is a great sign, signalling a hunger for the automation of video ads.

23.5%

OUT OF HOME

6.6%

OTHER

3.3%


SATURATION MAY BE LOW, BUT SPEND IS ON THE RISE

WHAT PERCENT OF YOUR TV SPEND IS CURRENTLY DONE PROGRAMMATICALLY AND WHAT PERCENT DO YOU EXPECT 12 MONTHS FROM NOW? 0%

But if you dig a little deeper, things start to look optimistic pretty fast, especially when it comes to year-over-year growth in the proportion of programmatic TV spend relative to direct. Currently, the average is between 3.7 percent and 6.0 percent. By next year, that range is expected to increase to 8.0 percent and 12.6 percent. This would mean that programmatic TV dollars are expected to double by 2016.

61.8% / 21.3%

1–5%

17.6% / 30.9%

6–10%

8.1% / 17.3%

11–15%

4.0% / 9.2%

16–20%

1.8% / 10.7%

21–30%

2.6% / 3.3%

31–50%

2.9% / 4.0%

51–75%

0.0% / 1.8%

76–100%

1.1% / 1.5%

CURRENTLY 12 MONTHS FROM NOW



SATURATION MAY BE LOW, BUT SPEND IS ON THE RISE

GABE GREENBERG GM of advanced TV, The Trade Desk Another indication of growth is the proportion of respondents buying no TV inventory programmatically. This year, about 62 percent are doing all of their TV deals directly. In 2016, that proportion will drop to 22 percent, which means that 78 percent of buyers will be buying some level of their TV inventory through programmatic channels.

Some of these results are stunning when you consider the sheer potential in TV dollars. If 23 percent of TV buyers bought all of their inventory programmatically, it could add up to $65 billion.

“Agencies can’t just go out and buy media,” said Kramer. “We need approval from our clients. 2015 is when most of them are taking a step forward, saying, ‘Let me test this and see what it can do.’”

But as activity around programmatic TV heats up, key players must consider the implications on both the buy and sell side, including the resistance that exists on both ends of the spectrum. The sell side has real scarcity of inventory and sees programmatic as a means to power audience targeting and increase their rates for valuable inventory. The buy side has similar hopes, but they must recognize publishers’ concerns and avoid partners seeking to arbitrage inventory, as this will quickly stall or stunt the growth of programmatic TV.

When asked how long it would take them to shift a significant portion of their TV budgets to programmatic, a majority indicated that it would take more than one year (34 percent said 1–2 years; 31 percent said more than 2 years). Still, a year is not a long time in the media industry, and as the projected spending growth demonstrates, we can expect the increase to be exponential once the right infrastructure is in place. To take advantage of it, brands and agencies need to start thinking strategically now.

While many of the respondents in this study feel that an increase in programmatic TV will lower TV CPMs, we disagree. Layering automation and addressability onto TV will cause the CPM to grow. Sellers have an economic incentive to join an open marketplace, and buyers will benefit from the opportunity to secure premium inventory for their campaigns. 9 / STAY TUNED PROGRAMMATIC TV IS UP NEXT


WHO’S HOLDING THE CHECKBOOK? HOW WOULD YOU DEFINE THE TEAM RESPONSIBLE FOR BUYING PROGRAMMATIC TV IN YOUR ORGANIZATION NOW AND IN 12 MONTHS?

DIGITAL TEAM TV TEAM

32.8% / 38.1% 32.1% / 29.8%

VIDEO TEAM OTHER

20.0% / 18.5%

15.1% / 13.6%

Most agencies are known for their siloed teams. So where exactly does the responsibility for programmatic TV sit? The answer is different depending on whether you’re asking now or in 12 months. Right now, it’s an even split between digital (33 percent) and TV (32 percent) teams. Each has its advantage, with digital understanding the analytics and having the programmatic experience while TV teams really get the traditional medium. Most of the remainder says that the duty falls to specific “video” teams, likely operating across channels where video content is present.

CURRENTLY IN 12 MONTHS

However, in 12 months, there’s a perceptible shift pushing digital teams into the lead. Bill Reynolds, Erwin Penland’s evp and executive director of media, says the job rests with his TV team, but he added, “The traditional TV buyers would need some guidance from our digital buyers to really understand how it works.” Digital teams may very well be the hub of future programmatic buying, and some likely reasons are the metrics, the digital nature of data targeting, and the automation, which these teams understand and hold in their DNA.



TELLING IT LIKE IT IS, EVEN ON TV

WHAT’S THE MOST IMPORTANT METRIC FOR DETERMINING HOW PROGRAMMATIC TV INVENTORY PERFORMS?

TV ad performance has never been transparent, a reality that organizations like Nielsen have capitalized on for decades with methods like their set-top “People Meter.” But these methods have not been the most efficient. “If you’re buying off Nielsen ratings, a zero rating won’t justify a buy,” said Reynolds. “But the audience is not zero. It’s just projected at zero because the sample size isn’t big enough to calculate a rating. Programmatic is about finding those pockets of value that are currently ignored by the current metrics.” As a result, respondents are still split on what the key metrics should be when deciding whether or not to buy certain programmatic TV inventory.


BRAND LIFT

22.8%

BRAND RECALL

18.0%

INCREASED PURCHASE INTENT

27.6%

DIRECT RESPONSE METRICS

21.3%

OTHER

10.3%


TELLING IT LIKE IT IS, EVEN ON TV

Forty-five percent are using data from their digital media buys to inform their TV buys (both direct and programmatic). This very well could include digital audience insights to make targeting on television more of a science and less of an art. “They’re taking response and engagement data from online video and display and trying to reverse engineer it,” Kramer explained. “We know that people watching certain TV programs are also going to certain websites. And of all these websites, some perform the best for these clients’ ads.” Buyers can use this information to make their TV buys more efficient. This is a trend to watch: Over half who are using their digital data for TV have only been doing so for the past six months, and 63 percent of those who aren’t say they plan to in the future. Still, the hope is that TV data will get good enough on its own as it goes programmatic.

80%

But what about the old method of buying based on Gross Rating Points and impressions? An overwhelming 80 percent want this to remain an option. Does this mean they think it’s the better way to go? Not likely. It’s unrealistic to think that the industry would reinvent itself overnight. “We’ve got to take baby steps here,” said Kramer. “The networks don’t want to do it yet, the clients don’t want to do it and the agencies shouldn’t push too hard until they have a viable replacement. It will take time.”



COORDINATION IS KEY WITH THE RISE OF PROGRAMMATIC HOW IMPORTANT IS IT FOR YOU TO BUY PROGRAMMATIC TV INVENTORY ALONGSIDE DIGITAL VIDEO INVENTORY?

40%

Digital video and TV alone with not go deep enough, and this is why brands and agencies are turning to multi-channel DSPs to power their programmatic TV. Multi-channel campaigns coordinated across screens could be highly complex with more significant and strategic reach, and buyers who adopt this as part of their game plan will likely restructure their teams with that in mind.

VERY IMPORTANT

33.2%

IMPORTANT

23.9%

SOMEWHAT IMPORTANT

25.6%

NOT VERY IMPORTANT

9.2%

NOT AT ALL IMPORTANT

8.0%

But this hints at a more important point. When asked how important it is to be able to buy programmatic TV alongside digital video, the largest proportion (33 percent) says it’s very important. For programmatic TV to be successful TV, video and digital will need to work together to leverage the detailed data and device IDs powering audience targeting. 13 / STAY TUNED PROGRAMMATIC TV IS UP NEXT

You guessed it: 40 percent also say that it’s very important to use the same metrics between connected TV (including over-the-top media) and digital video.

“The value of having real granular data to use for these buys is important,” said Reynolds. “In theory, we should be able to identify people on the back end who were exposed to the ad and connect them to subsequent buying behavior.” But we aren’t quite there yet. “In 2015 and 2016, I think programmatic is just a better way to buy TV. The integration will come.” Omnicom’s Kramer is a bit more guarded: “We need to be careful; we need to do a lot of testing before we really dive head-first into the shallow end of the pool.” Still, the results are clear: commensurability of metrics and coordination of buys are crucial to making this inventory more assessable relative to other media. THE TRADE DESK + DIGIDAY

CONCLUSION: SO WHY THE WAIT?

While there are some obvious hurdles, including tech infrastructure, programmatic TV seems like a great deal for buyers and sellers. Better targeting, broader reach, and coordination across media is a hard trifecta to argue with. So what’s up with the resistance? According to 46 percent of respondents, programmatic TV will actually lower the hallowed CPM. And while 30 percent point to the tech being the biggest stumbling block, another 23 percent say there’s an industry-wide status quo or resistance to change when it comes to TV. To be even more specific, 12 percent point the finger squarely at broadcast sellers pushing back against any change moving traditional TV down the programmatic pipeline.


Coincidence? Probably not. But it’s up to buyers to push the issue. Industry veterans will remember that publishers held out against programmatic as well. How did that game of tug-of-war end? The quickest way to move broadcast sellers to programmatic is to encourage an open market where arbitrage ceases to loom over the process. Allowing entrenched legacy parties to bar the way to progress is simply not an option. Not when there’s so much to be gained, anyway. That time is coming faster than most expect. The next few innings will be quite exciting. We look forward to you getting in the game.
