Automation not auction – the reality of programmatic TV

Following Channel 4’s announcement that it is to start programmatically trading ads next year, TubeMogul‘s managing director, Nick Reid, says more broadcasters need to follow suit.

Last month Channel 4 announced that it would be opening up 4oD to programmatic buying in 2015. In this deal, Channel 4 gives advertisers the opportunity to match their first-party data with the broadcaster’s own first-party data for audience targeting.

This looks to start off 2015 as the year in which we can talk seriously about programmatic TV. There is still a market education job to be done: to clarify and answer any misconceptions or concerns about how key issues like pricing and reporting will be affected.

The first question we need to ask is: what is programmatic TV? There is often a misconception that programmatic is synonymous with “real-time bidding,” or auction-based buying. This leads to an assumption that the price of inventory will be driven down.

However, TV advertising isn’t delivered in real-time and instead relies upon a fixed price and agreed-upon inventory quantity. Accordingly, there is currently no place for real-time bidding – and we question whether that will change for some time. Programmatic TV, therefore, is the data-driven automation of audience-based buying – something that holds significant benefits for both broadcaster and brand alike.

Historically, broadcasters have not been adverse to automation – a sizeable chunk of TV’s creative decisioning is executed through automated systems already. However, the planning, buying, measurement, and reporting are still tedious and time consuming.

Moreover, the targeting criteria are limited to traditional age and gender demographics related to the audience profile of content. Both of these shortcomings can be rectified through a single centralised platform that allows one-stop shopping for advertisers’ branding needs.

If we think about how TV buys happen, there is an opportunity for broadcasters and brands to add value through strategic audience data, offering broadcasters incremental revenue and enabling them to tap into digital ad spend.

Broadcasters have a huge wealth of data at their fingertips, and as TV consumption shifts away from appointment-to-view and is disrupted by device fragmentation, there is an opportunity to utilise software-based buying. Channel 4, therefore, has made a smart and forward-looking decision by using VOD to build up and incrementally scale its evolving business.

Within a programmatic model advertisers benefit from a single, centralised platform that manages all aspects of their video buys – regardless of screen – as well as the ability to use their data. They also gain greater control and transparency over what they are buying and can ensure the quality of the ad experience when it comes to player size, contextual surroundings, and brand safety.

Advertisers will also benefit from using software to select a specific programming, network, day part, and audience – based on sights from previous campaigns – but will do so in advance. Broadcasters can then forecast against these variables while simultaneously maintaining control over their pricing.

The way that TV is bought and sold currently won’t change – not for a while anyway. But the pipes that connect advertiser to broadcaster will be automated. What we’ve seen in online video is that advertisers are increasingly moving away from open exchanges and adopting a programmatic direct model instead.

This direct deal between advertiser and broadcaster (or publisher) is a mirror of the upfront model where pricing is fixed, or at least a floor is established. However, the pricing mechanics will take some time to iron out and experimentation will be required to get it right.

Ultimately, advertisers’ ambition is there and growing, so broadcasters must inevitably embrace programmatic in order to maximise the opportunity offered by digital TV. What needs to be made clear is that this does not represent a massive departure from the traditional modus operandi: it allows broadcasters and advertisers to utilise data in TV buys, and allows holistic planning, buying, and reporting the same way we do online.

There is still work to be done in terms of communicating this message, and there will inevitably be a test-and-learn period where pricing mechanics are ironed out. Channel 4’s move into programmatic reserves, however, should accelerate this process as we head into 2015.

Many people have said that the advent of programmatic TV means we’ll need entirely new business models. From our perspective, we think programmatic TV will look more similar to “programmatic direct” than anything exchange based. Fixed price, fixed inventory, guaranteed. None of the pricing will be real-time (at least not in the medium-term) – but the actual planning, buying, decisioning, and reporting will be centralised and automated through software.

We have seen numerous global brands like Lenovo and Nestle embrace software-based buying to drive greater efficiency and control, ultimately making their buys smarter and more effective in reaching their target audiences. Other advertisers should be able to enjoy these same benefits and reach their audiences across any screen – including the one in the living room.