TV: The Programmatic Promise

Alex Dixie in Advertising

in Advertising

In online advertising there is an often stated phrase that “content is king”; if you get your content right there is good enough technology out there to be able to deliver it to the right people. If you deliver bad creative, you will not get a response; the medium is not the message. The most expensive, premium advertising slot is worthless if you fill it with poor creative which does not resonate with your target audience.

TV is a different world. In fact, “inventory is king”. By its very nature, linear broadcast television is a closed system which is very tightly controlled by a small number of networks.

Purchasing behaviour is also very different between online and television. Rather than on-demand, reactional advertising that can be seen in the world of online advertising where creative costs are comparatively low and lead-times are short, the vast majority of television advertising is purchased far in advance. In fact, at the beginning of each year, brands make their campaign decisions and decide almost the full year of their placements in advance. These advertising slots are paid for upfront and networks use this money to fund their programming content throughout the year.

It is therefore difficult to see any incentive for networks to move away from this model. The pressures which resulted in the adoption of programmatic online (namely the race to the bottom caused by the vast number of competing publishers and the relative scarcity of advertisers with budgets to spend) just do not exist in television. New entrants face huge difficulties in developing a marketable platform for advertising and, even when they do manage this, the lure of adopting the status quo approach to television ad sales means that alternative strategies mirroring the online world just do not make financial sense.

As is true for all markets, disruption will come eventually. The question is more around timing. Predictions of the “next big thing” in adtech over the past few years have all included programmatic television. And yet, it has still not arrived. Partially this is a technological challenge – programmatic television without real-time feedback and two-way communication between the broadcaster and the user cannot succeed. However, this is slowly beginning to change. Smart televisions with the capability of actively providing information back to the broadcaster are becoming all pervasive. In addition, as the number of households with pay TV continues to increase, these feedback loops are moving from being the exception to being the norm. The first part of the puzzle is therefore very nearly in place. However, as discussed above, the networks and broadcasters remain reticent to make use of these new opportunities; preferring to continue to sell advertising on the basis of BARB ratings. The timeframe for this attitude changing remains to be seen but we can be certain this will not change overnight.

Television remains ripe for a shake-up – and the old-world networks are beginning to understand this. As more consumer viewing moves to alternative platforms and away from traditional television, the power will shift. To date the television advertising market has remained, some would say surprisingly, robust in the face of continued predictions of decline. However, it is still a fact that the number of hours people are watching television is slowly but surely on a downward trend.

A final thought is this. Rather than the “television” market significantly changing, what I think we will see over the next few years is a change in the definition of what constitutes “television” as consumers move away from a large fixed, dedicated box in a corner of the room. Viewing will become more personal with devices such as Chromecast and Apple TV allowing the sharing of experiences with a wider audience. Television is not disappearing, it is evolving; much in the same way as we in the UK went from 3 channels in 1982 to over 300 today.

TV: The Programmatic Promise was last modified: April 29th, 2016 by Alex Dixie