• by Joel Melby , March 27, 2015

Editor's Note: This post was previously published last August, but is still relevant today:

Programmatic TV advertising has become a hot topic recently, but what does it really mean? The digital advertising players have been developing a programmatic ecosystem for some time, yet they define programmatic in what amounts to a “I’ll know it when I see it” manner. So how might we map such a loosely formed concept to the TV advertising industry?

Why Isn’t TV “Just Like” Online Video?

Before we jump on the programmatic bandwagon, let’s understand how digital and TV advertising fundamentally differ:

Supply vs. Demand

Like any market, advertising follows basic microeconomic principles. In the case of digital ads, the supply of advertising opportunities is essentially unlimited. Even with $50 billion in play, the demand for those opportunities is still bounded; publishers are always looking for buyers, and buyers can typically expect to find whatever audiences they need. TV on the other hand, is a seller’s market, with buyers looking for future commitments and deals amongst its relatively fixed supply of inventory.

Addressability

Traditionally, TV content has been delivered via broadcast, making it impossible to exclusively target or address a specific set of viewers – today, the majority of TV impressions are still delivered this way. Instead of the highly specific impression-level targeting possible with digital advertising, TV audiences are usually indirectly addressed as blocks of impressions, using specific programs or networks as proxies for the actual audiences.

Increasingly, distributors/operators are deploying technologies that allow household targeting within broadcast and on-demand programming, but the scale of impressions available through these mechanisms is still relatively small.

And because of the nature of the technologies and the television ecosystem, TV impressions are difficult to compare with digital impressions.

Measurement Mechanisms

In the digital ecosystem, impressions are measured primarily by tracking pixels fired by each user’s browser or app at the time of delivery. On the other hand, TV audience measurement is tied up in a thicket of legacy business constraints, Congress-mandated privacy restrictions, and technological limitations. As a result, audience size and composition is statistically derived for blocks of impressions at the national and market-level from sampled tuning data, typically provided days after the impressions occurred.

Lead and Lag Times

Programmatic digital advertising is a nearly instant kind of business; load your campaign into Demand-Side Platform (DSP) of your choice, upload the creative to the Content Delivery Network (CDN) of your choice, and wait for comScore or Nielsen to tell you how you’re doing.

Not so for television. The majority of TV impressions are bought months in advance, and every supplier requires a traffic lead time (from hours to days in advance). TV creatives generally must be approved before airing. Occasionally, some measurement data can be made available overnight, but final reporting won’t be available until two or three weeks after airing.

What Is Programmatic TV?

Given these fundamental differences between the TV and digital worlds, programmatic television advertising requires a different definition. For programmatic TV, the definition needs to be pared down. It is the automation of data-driven, audience-based advertising transactions.

When we say automation, this refers to the automation of the end-to-end (advertiser to supplier), round-trip (media planning through affidavit and invoice), transactional workflow. Inventory selection is driven by quantitative data and audience targeting goals, rather than by qualitative spot buying.

You’ll note that the definition above does not use words like “real-time bidding” or “auction.” These are semantics that can be layered on top of programmatic transactions, not the essential ingredients. Auctions are just one means of buyers and sellers agreeing on a price; just as in digital advertising, such pricing also can be fixed via separate negotiations. Likewise, these transactions can be done in real-time or on a reserved/futures basis — to be clear, it is unlikely that any TV advertising will be transacted in real-time due to technological and business reasons.

Where Are We Headed?

TV advertising systems are complicated, balkanized, and extremely busy running a $70 billion business. We won’t get to a true programmatic ecosystem overnight. Instead, we see a staged slither-crawl-walk-run transition playing out over the next several years. The goal of this process will be collaboration within the industry to create standards and increase the chance of success for all players. There will be slow adopters, who fear devaluating their hit show inventory, for example; but over time, we hope the simplicity of automation, plus the immediacy of data, will prevail in uniting the supply-side and demand-side economics of TV.

Buyers and suppliers have been electronically distributing insertion orders and invoices for some time (a precursor to programmatic), but it’s only now that the various ecosystem players have started the arduous process of building workflow automation and developing the predictive audience models needed to translate between buyers’ audience goals and supplier avail inventory. That process must include the adoption of an industry standard suite of application programming interfaces (APIs) that allows buyers’ and sellers’ systems to interact.