‘The opportunities are being throttled’: Internet-enabled TV is missing out on programmatic ad buys
Internet-enabled TV — or connected TV, as it also goes by — is emerging as a valuable inventory source for TV networks to offset linear viewership declines and for digital publishers to push larger ad packages. However, publishers are treating their connected TV inventory so preciously that it is frustrating advertisers interested in programmatically purchasing ads streamed on households’ biggest screens.
Advertisers and ad tech firms continue to prime the programmatic pump for connected TV ad sellers, from TV networks and individual publishers to platforms like Amazon’s Fire TV and Roku. According to ad buyers interviewed for this article, clients are buying more connected TV inventory programmatically than they were a year ago. However, there continue to be constraints — such as pricing, inventory availability and targeting — that are capping advertisers’ ability to automate their connected TV ad buys.
“Underinvested is a good way to think about it,” said Paul Dolan, CEO of Varick Media Management. The programmatic consulting firm has never had more clients purchasing connected TV inventory programmatically than it does now; however “I haven’t had any reach maximum investment levels,” he said.
Advertisers are not necessarily incentivized today to buy publishers’ connected TV inventory programmatically. This inventory can typically be had for cheaper when buying it directly from a publisher as opposed to purchasing it programmatically through an aggregator like a connected TV platform, such as Roku or Samsung, or a supply-side platform, such as SpotX or Telaria. Connected TV ads usually cost between $20 and $30 for every thousand impressions when bought directly, but when bought programmatically, the CPMs can rise to range from $30 to $40, according to one ad buyer.
While the ad tech tax can partially account for the higher price, another explanation is that publishers incentivize advertisers to buy their connected TV inventory directly versus programmatically. Advertisers are able to lobby for lower prices when buying directly from a publisher because publishers are typically willing to lower their prices in exchange for securing a minimum spend commitment. Additionally, direct deals can bundle a publisher’s inventory across many platforms and include placements that can allow for a discounted overall CPM, said Nadalie Dias, senior director of digital activation at Hearts & Science.
For advertisers unable to afford the minimum spend requirement, buying connected TV inventory programmatically can work out to be less costly overall. “We can go in through programmatic with more focused budgets, i.e. smaller budgets than might be required on a direct buy, and that offsets the pricing efficiencies,” said Dolan.
“The opportunities are being throttled on the publisher side,” said Justin Scarborough, programmatic media director at PMG. As a result, Scarborough advises clients that, if they’re buying a lot of connected TV inventory programmatically, they’re likely to be receiving publishers’ remnant inventory, or whatever is left after the advertisers buying directly have been satisfied.
Further complicating inventory availability, ad buyers see the volume of programmatically available connected TV inventory fluctuate, especially among TV networks. Live events streamed through networks’ OTT apps can lead to inventory surges one week that can subside a week later. Since TV networks will usually use whatever available inventory they have to fulfill guarantees they made to direct advertisers, programmatic buyers can be effectively waitlisted. “There is a waterfall at play, and programmatic is not at the top of it,” said Jesse Math, vp of display and social and OTT lead at ForwardPMX.
There are opportunities for programmatic advertisers to ascend the connected TV inventory waterfall. Private marketplaces have emerged as a popular way for advertisers to address some of the pain points associated with purchasing connected TV inventory programmatically. PMP deals typically require advertisers to bid no lower than an agreed-upon rate in order to access the participating publishers’ inventory. In exchange for that pricing floor, the publishers make some of their more valuable inventory available that they might otherwise limit to direct buys.
Additionally, PMPs can help advertisers to overcome connected TV’s targeting limitations, which can be off-putting to those accustomed to buying online display and video ads programmatically. Traditional TV’s default method of targeting audiences based on age and gender is easily done for connected TV inventory purchased programmatically through aggregators. “But if you want to add additional layers of targeting, like interest or viewership behavior, then it makes it more difficult today to run that programmatically because, say for Hulu, they’d want you to run that as a direct deal,” said Dolan.
In the case of Hulu, the streaming video service recently rolled out a PMP that allows advertisers to buy its inventory programmatically and use the same targeting parameters available if purchased directly. Advertisers can target their ads based on Hulu’s own viewership data and also layer in first- and third-party data; Varick is testing Hulu’s PMP to see how the targeting compares but has yet to receive the results, Dolan said. Advertisers are similarly able to arrange for more sophisticated targeting by putting together PMP deals with other publishers and connected TV platforms, said Math.
However, there isn’t always enough connected TV inventory available to make pinpointing specific audiences worthwhile. “Clients always really want to go after really niche audiences, and that’s not always scalable, especially in the CTV space,” said Dias.
Advertisers and ad tech firms are working to connect the identifiers used to match audiences across various connected TV platforms and individual OTT apps as well as other platforms. However connected TV match rates can often come up short.
“[For] some providers, we might see a match rate of like 50 or 60 percent against inventory in other places, and maybe connected TV is like 20 [percent]. So we might find them; we just don’t find them at the rate that we want,” said Dias.
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