Real-Time Bidding Not Coming To TV Advertising At Scale Anytime Soon

Real-time bidding (RTB) has had a massive impact on the online display ad market. Billions of dollars worth of online ad impressions are bought and sold “programmatically” on exchanges through RTB systems on an annual basis today. RTB is certainly the fastest-growing sector in digital marketing  -- and, given the extraordinary efficiency it brings to the buying and selling process, many expect it to swallow up more and more of the market over the next few years.

Many also expect RTB to invade and consume the television advertising market before long. Why not? Television is an electronic medium with electronic ads and electronic insertion, and many parts of the industry’s infrastructure -- from set-top boxes to planning systems to distribution -- are starting to become digital and Internet-Protocol driven. It’s a marketplace that many see as fraught with inefficiency and, given its massive scale -- more than $70 billion is spent on TV ads in the U.S. annually -- lots of money could potentially be saved or better spent.



Do I think RTB is going to come to TV at scale anytime soon? No way! Here’s why not:

Full-digital technology infrastructure many years away. TV advertising and TV content today is driven by and delivered by electronic systems, and sometimes digital systems, but most of them were built or designed in the 1980s and 1990s and have very little capacity to support the dynamic, real-time delivery of advertising in a robust and scaled way. Sure, companies like Visible World, Invidi, FreeWheel and BlackArrow are deploying modern ad insertion into cable, satellite and teleco operator environments, but it’s going to be many, many years until these systems are ready to be used for the bulk of national and local TV ad deliveries. This won’t happen until we have a significant amount of our TV delivered over Internet Protocol networks, a development five to seven years away at the earliest.

TV spots not tradable. TV media owners are in a good place. They control precious assets: sight, sound and motion content and ads delivered to passive consumers. These assets have self-evident value to advertisers and media buyers whose demand for the best assets is growing faster than the supply. TV media owner businesses are highly profitable today and still growing. Ironically, TV advertising grew 50% faster last year than online advertising, off a much bigger base. TV media owners maintain scarcity for the spots by tightly controlling who can buy them,  and what buyers can -- and can’t -- do with spots.

Today, owners sell almost no TV media in a “tradable” way. Agencies need to buy spots for specific clients -- and, outside of direct response (where there is very little control over placement and timing), agencies can’t “trade” those spots to others, like what happens in the online world with the vast majority of placements. Are TV media owners likely to embrace “tradability” of their spots for RTB? Why would they? They have little incentive. Why risk billions for what is probably just millions in gained efficiency?

Online precedent scary. RTB and exchanges have decreased prices for many online media owners and have compressed the margins of many of the enablers and intermediaries. That scares folks in the TV ad ecosystem. I don’t think they’re too eager to risk the status quo, which is a pretty nice world for most of them.

However, the fact that RTB won’t happen in TV any time soon doesn’t mean that we won’t see some introduction of “programmatic” approaches in the market, where online-ad-like, data-driven digital systems help sellers, buyers and advertisers algorithmically improve their products and processes. Today, probably 99.9% of TV ad spending is based on content and analog (small data) optimization systems. By 2015, I bet that 15%-20% of TV will be sold, bought, optimized, measured, accounted or integrated on a data-denominated basis other than sex/age ratings, but that’s another column.

What do you think?

8 comments about "Real-Time Bidding Not Coming To TV Advertising At Scale Anytime Soon".
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  1. Joey Jodar from Heavy Inc., March 7, 2013 at 3:54 p.m.

    This contradicts what the RTB evangelist are preaching to us, particularly the incessant RTB Mediapost spams I receive daily and the non-stop "targeted" "programmatic" ads I get through Adsense whereever I go online. Are we to believe the contradictory promises of RTB/programmtic types? How are they any different from the myriad ad networks of lore, now often set up offshore (am I the only one who finds this suspect?), promising big revenue for publishers and lower prices for advertisers all in the same offering?!! Isn't this just the sound of someone speaking out of two sides of their mouth?

  2. Paula Lynn from Who Else Unlimited, March 7, 2013 at 4:08 p.m.

    Reality trumps.

  3. Walter Sabo from SABO media, March 7, 2013 at 5:27 p.m.

    You're right. TV won't do this any time soon. They used to sell in bulk to media buying services who parceled out the spots to various clients.

    There is also an FCC issue which is that by law they are responsible for the content they air so they must pre-screen all spots. A real-time buy would send their lawyers screaming.

  4. Dave Morgan from Simulmedia, March 7, 2013 at 6:26 p.m.

    Great point about pre-screen Walter. For sure, that will be one of the things the TV media owners will lean on to resist real-time ad insertions.

  5. John Grono from GAP Research, March 7, 2013 at 6:51 p.m.

    Don't forget that TV controls for conflicts and adjacencies. Online doesn't offer or afford this level of comfort for an advertiser.

  6. Gian Fulgoni from 4490 Ventures, March 9, 2013 at 1:23 p.m.

    TV advertising last year grew 50% faster than online?! I don't think so. While TV did have a great Q3 (+15%), fueled by the Olympics and elections, for Q1-Q3 2012 Kantar reports TV grew by +9% while the IAB says online ad spending grew by +15% during the same period of time.

  7. Dave Morgan from Simulmedia, March 9, 2013 at 1:35 p.m.

    Gian, I should have been more specific on the TV versus online ad growth. I meant online display, not including search. The numbers just released from SMI (from the buyers' accounting systems) showed that online display only grew 4% while TV grew more than 6%. Yes. the IAB shows a bigger number.

  8. Gian Fulgoni from 4490 Ventures, March 9, 2013 at 1:59 p.m.

    Hi Dave: I think the type of digital ad format is the issue, because growth rates vary dramatically across them. For example, in Q2, 2012 (the most recent IAB data available by ad format), "display-related" grew at 6%. But by format, banners grew +12% and video grew +18%. Overall display growth was held back by a -34% decline in rich media! Based upon conversations I've had with agencies, it would appear that the production cost of rich media is driving many agencies to repurpose existing TV ads in online video -- either as 30s or 15s. All of that said, I agree with your point that RTB ain't coming to TV anytime soon.

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