Committee Corner: Programmatic, Problematic?

[As published in the DRMA Voice, a publication for the Alliance for Performance-Based Marketers]

Jeff Lazkani | VP, Business Development & Strategy

In today’s evolving media environment — wrought with seemingly daily progression in technological advancement — marketers often feel as though they’re racing for victory on a track showing no finish line. Customer and response data aggregation has become a foothold for forward progress, resulting in a new collaboration paradigm between agencies and advertisers.

Gone are the days where online and offline marketing initiatives could coexist in separate silos while individual marketing teams marched to the beat of their own drum. Lines have blurred across the customer journey, meaning the strength of a marketing team’s analytical backbone and holistic understanding of how individual marketing touchpoints impact both top of the funnel awareness and downstream conversion are more critical than ever.

Strong analytics empower agencies and marketers alike to equip themselves with vital visibility into cross-channel response metrics, informing an optimized media mix, mitigating marketing waste, and protecting oh-so-precious profitability margins. They also create a thirst for new and exciting data-driven media opportunities that can help provide incremental reach and revenue, while delivering impressions against new and/or hyper-targeted segments of an audience.

One such opportunity that has grown as a conversation topic in recent years is programmatic TV. And while it’s been discussed at length, most are still unclear on what it really means. Unlike digital programmatic, TV inventory is not purchased through an exchange or DSP with real-time bidding. Linear TV inventory has its own set of fundamental rules and characteristics; therefore programmatic TV requires a more broad classification than its digital counterpart. Loosely defined, it is CPM-automated, data-driven (first or third party), audience based transacting. In actuality, how prevalent is linear programmatic TV buying? That is, programmatic in its truest sense — where inventory is bought and sold on impressions, using software automation.

While there are those that would argue the viability of programmatic TV in its current form, the fact is there remain inherent challenges on the linear TV landscape that have prevented programmatic TV buying from reaching its promised potential. In fact, the “programmatic TV” that is taking place today offers little in terms of scale or efficiency, as the inventory pool is currently limited and mostly consists of local media, often at the higher end of the CPM spectrum.

Companies playing in the programmatic TV space are finding that TV commercial integration lead-times and a constant demand on supply are unique challenges. Linear TV inventory is finite. Upwards of 60 to 80 percent of national TV inventory is sold in the upfronts (depending on daypart/genre/network) with annual CPM increases fed by marketplace demand. The remaining inventory is sold through the scatter marketplace, which is in constant sell-out and has seen historically high pressure in recent years, giving sales reps more control over pricing and inventory flow.

Scatter inventory is also a necessity for media providers to manage against CPM guarantees and under-delivery in the form of ADUs (make-good inventory). If media providers relinquish scatter inventory in lieu of a programmatic platform, it would likely end up causing more harm than good to the existing TV ad sales model — one of the reasons the industry is yet to see a media provider rush up the mountain to pioneer the programmatic landscape since a failed attempt at what was once promised to be a programmatic breakthrough: Google TV Ads, which was discontinued in 2012.

Where will programmatic TV go in the coming years? There are plenty of forward-thinking companies focused on cracking the nut. However there are many variables that may impact programmatic TV’s evolution — not the least of which is media provider industry consolidation. As the industry further consolidates, operational changes may become increasingly necessary, opening the door for more programmatic sales offerings. And it’s no secret that Google is investing resources into another attempt at getting programmatic TV right.

But will the media providers relinquish enough inventory to make programmatic TV a viable platform? Will they allow themselves to lose ad sales control? We have yet to see meaningful adoption. One thing we do know: from an audience targeting perspective, entrants will need to tread carefully. The Federal Trade Commission’s (FTC) recent ruling against Vizio for violating the FTC Act protecting against consumers’ TV viewing information from being collected and sold to third parties and advertising entities was a massive blow to the connected TV audience targeting model.

Only time will tell whether or not the programmatic TV model can meet or surpass the effectiveness of tried-and-true, performance-based, direct response TV buying, which remains the clearest path to victory in TV marketing.

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