Programmatic TV is still facing many barriers to adoption — such as technology infrastructure challenges and TV’s traditional culture — however, addressable TV shows immense promise for the future.
Could mass TV advertising soon resemble digital? Programmatic ad buying has quietly overtaken online advertising in recent years, but the TV advertising model has been slow to adapt the same type of automation and audience buying the way the digital industry has. Many marketers want to know why change has been slow to take hold.
After all, programmatic buying can help them quickly and efficiently combine the rich amounts of demographic, geographic, and behavioral data they obtain online with specific ad targeting and automated media buying. This combination has no doubt led to the explosive growth programmatic ad spending has seen in the past few years. However, even with the advancements in the TV space and movement toward nonlinear watching behaviors – such as streaming, DVR, and video-on-demand – the average household TV set has stayed unaffected by this shift.
A combination of technological challenges and culture clashes will likely make programmatic TV growth happen slowly for the next few years, but addressable TV set top boxes (STBs) bring us closer than we have ever been before. When this does take off, marketers will finally be able to precisely target individuals no matter what screen they are looking at.
TV Broadcast Technology Needs Updating
TV’s linear broadcast model adds a barrier in the way of full-scale programmatic ad buying. More and more advertisers demand ways to fine tune and size out their audience so that they can know the approximate value of each ad they put out there.
Traditional TV targeting demographics are too broad for these needs. This lack of data translates to other missing infrastructure components that prevent true programmatic TV from taking off. There are few exchanges, no real-time bidding capability and a lack of targeting/tracking devices for TV sets that can replace browser cookies.
To fix this problem, many media companies now offer high-indexing programming, where advertisers can look for high value audiences in certain ZIP codes and/or broadcast zones that fit their chosen demographics. For example, a company can suggest a channel, programming block, and regional market that indexes highly for 18-25 year old men who buy a specific brand name truck.
While this type of programmatic TV targeting has become more refined than it once was, there is still the chance of wasted reach due to people outside of the target audience tuning into these programs.
Addressable TV can bring targeting down to the household level. About 60 million households have an addressable set top box right now, and that sizable amount grows every day as multiple system operators (MSOs) gradually expand addressable TV’s reach.
In fact, addressable TV holds promise for making linear TV programming more like the online ad environments that consumers have grown used to. Instead of having an ad broadcast to an area where only a slice of households will find it relevant, each addressable household can be targeted to have a personalized ad package that caters to their specific preferences. In response, media buying can become more data-focused, enabling marketers to attain higher ROI as they gauge ad performance on a house-by-house basis.
Traditional TV Culture Acts Like a Barrier
Even though more and more households are resorting to streaming through their living room TV and more MSOs adopt addressable TV, traditional cable and broadcast TV remain all but impenetrable to programmatic buying. Advertisers spent $710 million on programmatic TV ads in 2016, accounting for just 1.0% of the total. Although that figure is said to climb to 6.0% by 2018, it’s still just a fraction of the $7.62 forecasted for programmatic digital video ad spending.
Why the big disconnect? It’s not for lack of interest. Even though advertisers have big demands for more programmatic inventory, it may be that networking executives remain rooted in person-to-person buys. While they may see the promise in programmatic, they may also see the threat of commoditization, which means that “premium” advertising inventory could quickly become only “premium” in the eye of the beholder. When you add that to the fact that demand for ad inventory often outstrips supply, you can see why fear over losing control of pricing could drive resistance to change.
For now, programmatic TV will remain outpaced by traditional methods of TV advertising for the next few years until the number of addressable households grows and the corporate culture of TV adapts. When programmatic TV does take off, it will enable advertisers to buy group inventory across devices and target individuals rather than entire ZIP codes. When someone can be exposed to the same ad on a TV and a second screen at the same time, that’s when marketers will know the future has officially come to traditional television.