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Why Programmatic TV Ads Haven’t Taken Off Yet—and What’s in Store for the Future

Why Programmatic TV Ads Haven’t Taken Off Yet—and What’s in Store for the Future

January 31, 2017

Why Programmatic TV Ads Haven’t Taken Off Yet—and What’s in Store for the Future

The name alone—programmatic TV—sounds exciting. Some estimates put programmatic TV as a $17 billion advertising opportunity by 2019, but not everyone is as excited or as optimistic about the technology’s development or implementation. While programmatic ads represent half of all online ad transactions, they’re still only four percent of all TV ad transactions.

So if programmatic TV is the future of TV advertising, why hasn’t it developed more, and what needs to happen next for this technology to continue growing? 

What Is Programmatic TV, Exactly? 

Programmatic TV advertising is a new way to look at television advertising, using advanced analytics and programmatic display options to select ads for optimal audience-based placement.

Think of it this way: Traditional TV ads cost a fixed amount and had a certain desirability based almost exclusively on the ratings of a given TV show. For example, the Super Bowl always attracts some of the biggest ads and biggest budgets because of its immense draw. Programmatic TV, on the other hand, would price, select, and serve ads based on knowledge of the type of audience watching—so it might select a specific TV show or time of day to display an ad instead of raw audience volume data.

How Programmatic TV Differs From Real-Time Bidding (RTB)

On the surface, you might see programmatic TV as a television-based variant of RTB programmatic ads that are already in active circulation around the web. The comparison is fair, and for the most part, accurate, but there are a few differences that make programmatic TV different. For starters, supply on TV is limited because there are only so many hours in the day. Suppliers want to secure stable, solid, long-term commitments, and don’t want bidding wars and clever tactics to interfere with their bottom lines.

Generally, vendors and suppliers see programmatic TV as less mutually beneficial as web-based RTB; suppliers argue that such technology will commoditize their inventory, and vendors are concerned that the infancy of the technology will make bidding and ROI unpredictable.

Why Programmatic TV Hasn’t Exploded

In theory, programmatic TV should be a way for suppliers to sell more ads, and vendors to earn more visibility, engagement, and value for every dollar they spend. Yet, the Wall Street Journal describes programmatic TV as still “stuck in first gear.” Despite a flurry of announcements and developments in this niche even just a year ago, forward momentum has slowed significantly.

So what’s the holdup?

  • Definition. We attempted to define programmatic TV concisely, but the reality is the term has been tossed around for a number of different applications, including TV ad exchanges, services for ad targeting, and connected TV-related services. There’s no industry standard here, which makes consistent development an issue.
  • Lower demand. One of the biggest advantages of programmatic TV would be the automation of ad transactions—it worked out well for the online world with RTB. However, TV ads are already easy to buy and don’t require as many fast transactions, so demand for the tech is lower.
  • Insufficient technology. There have been a number of startups working on the programmatic TV problem, but none of them have generated much momentum or scaled. The technology just isn’t impressive or effective enough to draw new users in.
  • Supplier fears. TV advertising suppliers are also worried that this would commoditize their inventory, as we mentioned before. As a result, they’re less likely to support the development of this technology.
  • Complicated relationships. There are a number of hands in the programmatic TV pool, and each one adds complexity to the situation. There are TV advertisers and media agencies, demand-side platforms that use programmatic buying functions, supply-side platforms that use programmatic selling functions, data management platforms that help collect and interpret data, and finally, the publishers who supply the inventory.

Possibilities for the Future

So does that mean programmatic TV isn’t going to take off? Not necessarily. NBC and other major networks already have plans to implement programmatic solutions for their ads in the near future (though they’re taking their time). It’s just going to take a few years for suppliers to get used to the idea of programmatic selling, and bridge the gap between online programmatic advertising technology and available TV ads. One major breakthrough in demand-side platforms, supply-side platforms, or even in consumer demand could be the catalyst necessary to help programmatic TV take the next step forward.

If you’re in the advertising market and you’re looking for more options, be sure to contact Verta Media to learn how we can help!