WTF is programmatic TV advertising?

The $70 billion television advertising business is poised for a change. Following the path of desktop, social and mobile ads, the television industry is beginning to flirt with programmatic technologies. But the television ad ecosystem operates far differently than its digital cousin, so programmatic advertising — effectively, data-driven automation of advertising transactions — will take a different shape for the older medium. Here’s what that entails:

WTF is programmatic TV advertising?
Programmatic TV advertising is the data-driven automation of audience-based advertising transactions. It inverts the industry standard, in which marketers rely on show ratings to determine desirable audiences for their ads. Instead, with programmatic tech, marketers use audience data to pipe advertising to optimal places.

My head’s already spinning. Practically, what does that mean?
It means more specificity. Rather than relying on ratings for specific shows or channels, marketers can use programmatic tech to reach a more specific subset of consumers, like men with a $50,000 income who own an Android device. They don’t care if that ad shows up on X Factor or the X Games, as long as the target audience is watching. Most TV audience targeting today is not quite that advanced, however, which is one reason why programmatic TV is still in its infancy.

How does programmatic TV advertising differ from what’s happening on digital platforms?
Real-time bidding and auctions are commonly associated programmatic advertising. They work well on digital platforms, where supply is bountiful and buyers rule the market. Real-time ad transactions don’t gel as well with the TV marketplace, where supply is limited and sellers are looking to secure future commitments. For now, at least, programmatic TV buys aren’t conducted through the same real-time auctions powering programmatic ad sales online.

What’s the incentive for TV networks or cable providers to embrace programmatic?
Buyers and vendors argue that a lot of TV inventory today is undervalued, and that more specific audience targeting will help boost that value. Some TV executives don’t buy it, worried programmatic will commoditize and devalue their inventory. Ultimately, networks with a robust business aren’t motivated to change the way they sell. Lower-tier cable networks with a lot of inventory to sell will adopt programmatic a lot faster than a network like FOX.

How quickly is the market adopting programmatic TV advertising?
Not terribly quickly, yet. Buyers and sellers are familiarizing themselves with the landscape, but less than 1 percent of TV inventory has been sold programmatically this year. That could jump to as much as 3 to 5 percent in 2015, forecasted a panel of industry experts at a recent Advertising Week panel. What’s holding the market back, they said, is a lack of trusted data jointly accessible to brands, agencies and media partners.

Who’s the big winner here?
Brands and agencies stand to benefit from more targeted TV marketing, and undervalued cable networks could bolster their ad revenue, but the biggest winners are likely to be the tech vendors facilitating these transactions: companies like Google, Turn and TubeMogul. Whoever makes the most widely-used set of programmatic TV ad technologies could capture a substantial slice of a $70 billion market.