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Programmatic TV – The Rise and Future

Published: September 8, 2016

Author: Sophia Fen

Is programmatic the future of TV? At first, the two seem to be from different worlds.
TV in its most traditional sense (think sitting down to watch the Bachelor on ABC every Monday night) is programming that’s delivered in a linear fashion: it has a specific time, day, and channel. It’s predictable. Reliable. Digital media, and more specifically programmatic digital, came along as the opposite: this crazy, exciting, hyper-targeted phenomenon that moved almost too fast for the advertising and media industry to keep up with. It’s still constantly changing, growing, and adopting as technology shifts and expands. And recently, that shift has included the convergence of the two seemingly opposite media landscapes into what is now being referred to as programmatic television.
As brands seek more robust targeting, ways to optimize, and the ease of automation across channels and devices, programmatic technology offers a way to buy audiences, not just shows, on TV.

So, what exactly is “programmatic TV,” what does it mean, and when should advertisers and agencies use it?

In a new study titled “Programmatic TV’s Promise” by Advertising Age and The Trade Desk, programmatic TV advertising is defined as the “data-driven automation of audience-based advertising transactions. It inverts the industry standard, in which marketers rely on show ratings to determine desirable audiences for their ads. Instead, with programmatic tech, marketers use audience data to pipe advertising to optimal places.”
What does that all really mean? It means TV buying is getting a lot more specific and targeted when paired with technology (read: less waste, more efficiency). Instead of relying on certain show ratings to buy broadly against, brands and agencies can use programmatic tech to reach a much more specific group of consumers, such as women making $100k+ who are planning a vacation. It’s not as important if that ad shows up on Modern Family or Nashville as it is that the specific target audience is watching. This is similar to the shift we saw in digital display, moving from buying inventory on specific web sites to instead bidding on impressions in real time across the ad exchanges based on audience data.

Examples of Programmatic TV

Multi-Channel Video Programming Distributors (MVPDs)

MVPDs deliver programming in the form of paid TV and are the most linear in nature. Think Verizon Fios, Dish, and Comcast. For these more traditional channels, there is opportunity for programmatic through addressable TV. Addressable TV allows targeting at the household level by inserting ads through special set-top boxes. According to Digiday, addressable TV can currently target about 30% of US households as it requires newer set-top box models.

Over the Top (OTT) Content

OTT refers to TV content that is accessed via the Internet, without a cable subscription required, and lends itself to a digital video system. Some OTT players in the space are Roku, Hulu, Amazon Instant Video, Sling TV, and Crackle. This also includes connected (or smart) TVs. According to the Ad Age and The Trade Desk study, this is the most interesting type of programmatic TV because of its potential growth, especially since younger audiences are “cutting the cord” more and accessing content via web-based apps and services.

When Should Brands Use Programmatic TV?

It’s important to remember that this isn’t a one-size-fits-all solution, and not everyone should necessarily be clamoring to test it right away. It’s still very much in its experimental phase with a lot to be learned. However, depending on target audience, goals, and KPI metrics, it can add value to a brand’s media mix. For example, if your target audience skews heavily toward millennials, OTT makes sense. This new way to buy TV will also be extremely valuable for smaller brands. With limited budgets, there isn’t room to waste money on hitting a broad audience. You need better targeting to reach potential customers at the user level. The same goes if you are selling a very niche product or service.

Looking Ahead

Programmatic TV is still in its early stages, but it presents a huge opportunity to deliver more relevant ads to consumers. A report from Magna Global estimated that programmatic TV will represent 17% (or $10 billion!) of US TV budgets by 2019. These buys will represent a way to extend the reach of online video campaigns into targeted segments. I’m excited to see how TV continues to adopt programmatic technology – hopefully you are too!

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