Why DSP technology isn’t the future of TV advertising

The DSP has become a must-have tool, allowing brands to emphasize audience targets and execute digital campaigns automatically and efficiently. While DSPs are remarkable tools for executing digital media campaigns, they don’t seamlessly translate to TV and provide the same functionality in that environment. As such, DSPs may never fully be part of TV advertising’s future because of limited transparency, reach and scale, among other factors. 

Instead, advertisers will need other tools and strategies to execute their TV buys.

Direct connections between brands and publishers foster efficient collaboration

Demand side platforms were initially built to target unlimited inventory across multiple fragmented channels for online advertising. Even with the explosion of streaming and FAST channels, TV remains much more concentrated. Historically, TV advertising has been purchased directly from the network or publisher. This pattern has held for the rise of streaming, where the biggest players sell their inventory directly. 

Many buyers and sellers prefer these direct connections. While the automation isn’t as extensive as programmatic, they have built their workflows around submitting IOs and working without intermediaries, eliminating the need for a DSP.  

More importantly, by working directly with each other, brands and publishers have deeper and stronger relationships. This allows them to discuss budgets, explore program integrations, enhance data pipes, etc., contributing to more efficient and transparent campaigns.

Programmatic costs eat into buyers’ budgets

One of the biggest criticisms leveled at buying platforms is the fee structure. DSPs charge a 15-30% fee, while SSPs charge between 10% and 20%. That’s 50% of spending evaporated into fees rather than media. 

Brands using managed services provided by the DSP could pay another 17%. There is also an ad-serving fee, which is universal in programmatic but has yet to be widely discussed. The latter typically falls between 5% and 10%, so buyers sometimes pay an additional $0.75 CPM. Buyers starting with a $10 gross platform bid CPM can quickly watch their effective CPM climb north of $20 due to these fees, more than doubling the cost of the campaign.

DSPs do not support linear inventory, limiting reach and scale

Despite linear’s decline, TV isn’t a digital-only format. 

Linear TV still draws eyeballs and only fell below 50% of the viewing share for the first time last year. With CPMs that are more affordable than many advertisers expect, linear is an efficient way to drive performance. Modern TV advertising is all about convergent TV — a blend of linear, cable, streaming and online video — ensuring that advertisers get their desired reach and can then analyze and optimize their full TV results in one place.

DSPs, for all of their capabilities, cannot access linear inventory. Buyers who use a DSP for streaming or online video must find an alternative solution for their linear campaigns. Otherwise, those buyers only reach a subset of the TV audience that relies on streaming rather than the total audience. They also need scale. Most flagship live events with the greatest reach still happen on linear TV, including the Super Bowl, the Oscars, the Grammys and others.

DSP technology enables costly fraud

Despite programmatic automation and efficiency, it also creates layers between the ad buyer and seller. One campaign could have ads running across thousands of websites. This lack of transparency makes it easy for unscrupulous actors to game the system and profit off schemes that charge advertisers for ads that a real person never views.

The ad industry has learned to live with some level of fraud in display programmatic, but that ship won’t sail on TV. CPMs are simply too high in TV to accept any level of fraud as the cost of doing business. When media is traded directly between publisher and brand (or without the need for a DSP), fraud is a non-issue.

Despite the automation, these issues make it clear that purpose-built digital DSPs don’t fully match up against old-school direct transactions. Successful TV advertisers are incorporating TV-specific tools—Tatari is one resource—to execute their convergent TV buys. DSPs are mostly a narrative that the digital world is trying to impress upon TV marketers.

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