4 Reasons Programmatic TV Is Over-Hyped

Technology has forced even the most egregious laggards to embrace reality. In 2015, the Internet’s reach is so pervasive that it has even penetrated segments like utilities and luxury goods, two notable holdouts.

Add TV to that list. Despite the explosion in digital media over the past few years, which has completely redefined advertising, TV remains an oasis in which the buying and selling hasn’t really changed much since the Mad Men days.

Finally, that’s changing. In particular, there’s been a lot of talk lately about programmatic TV buying. That is, instead of salesmen making deals over three-martini lunches, some TV is starting to be bought and sold dynamically in a bidding process that reaches consumers in real time, while they’re theoretically in the best position to receive an ad message.

While TV’s late embrace of programmatic reaffirms the fact that the buying process works well, there are lots of reasons to be skeptical about claims that TV finally has gotten its act together and will fend off digital’s inevitable dominance. In particular, I can name four reasons why programmatic TV is over-hyped:



1.     TV is Losing Viewers in Droves. TV may finally be ready for millennial viewers, but millennials are tuning out. In 2011, 21.7 million young adults watched TV. In January 2015, the figure was 17.8 million, according to Nielsen. “The change in behavior is stunning,” Alan Wurtzel, NBCUniversal’s audience research chief, told the New York Post.

  “The use of streaming and smartphones just year-on-year is double-digit increases. I’ve never seen that kind of change in behavior.” That follows a 50% drop in TV viewership from 2002 to 2013. This upends the argument that ads shown on a TV are more effective. That may be true,  but if your audience is tuning out, it’s also irrelevant.

2.     Netflix is Eating TV Advertising. Remember when you used to flip around your cable TV options to find something to watch? If you’re one of those  40 million Americans who subscribe to Netflix, chances are your viewing habits have changed in recent years.

Now, instead of searching channels, you browse Netflix’s catalog. The upshot is that you’re watching fewer TV ads. As Netflix grows, ad-supported TV will make up less and less of the pie. At the same time, standalone options like HBO Now will make consumers question the wisdom of subscribing to cable in the first place.

3.     Perversely, This Makes TV Ads More Expensive. Supply and demand governs most businesses, but not TV advertising. In the 1972-1973 TV season, before cable and way before Netflix, the top-rated show got an estimated audience of 21.6 million households.  In the 2014-2015 season, being a top show meant you got 7 million to 8 million households  to tune in.

Despite the falloff in average viewership, TV advertising prices rise every year. A 30-second ad during “Monday Night Football,” the top-rated show, costs around $400,000 per Variety. A TV ad seller’s supporting argument here might be “Where else will you get 8 million people to tune in at the same time?” That brings us to our final point:

4.     The TV Ad Model is Irrelevant and Inefficient. If you want to reach 8 million people at the same time, you don’t need to do it via TV. In fact, that’s a wildly inefficient way to get your video ad in front of an audience of that size. That’s because TV ads are sold based on demographics – your age, sex, etc. – rather than interests.

Would you rather reach 8 million people who are likely to be between 18 and 49 years old or would you prefer it if those people had all indicated – via their online activity – that they are likely to be interested in what you’re selling?

Change takes a while to sink in. Advertising has advanced much just over the last decade. The TV industry is scrambling to catch up, but it’s too little, too late.

4 comments about "4 Reasons Programmatic TV Is Over-Hyped".
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  1. Ed Papazian from Media Dynamics Inc, July 9, 2015 at 8:43 a.m.

    Wow, it sure looks like TV is dead, doesn't it? What idiots those advertisers who will spend about $70 billion on TV this year must be? Don't they know that they are not reaching any of those precious Millennials and their ads just aren't being seen.

    Thank the Lord that TV "programmatic" buying is now with us ( actually, it's not ) to save advertisers from themselves and enable them to attain unheard of targeting efficiencies----with TV? But hasn't TV lost just about all of its worthwhile ( 18-34 ) audience? So, if these incredibly valuable young folk aren't watching---or will soon completely tune out for good---- why use TV at all----even with "programmatic" to "maximize" your targeting efficiency? Wont all of these consumers be reachable only via digital?

    What nonsense?

    When will digital ad sellers learn that they are not going to "scare" advertisers into "programmatic buying" or into digital media by chanting "TV is dying" endlessly----without  bothering to get their facts straight?

  2. Neil Ascher from The Midas Exchange, July 9, 2015 at 9:49 a.m.

    Thank you for remaining sane Ed!  The sky has not fallen. 

  3. David Scardino from TV & Film Content Development, July 9, 2015 at 11:37 a.m.

    Thank the Lord for truth tellers like my old boss, Ed Papazian! I would only quibble with Ed's last graf since, given the proliferation of these pitches, some (many?) advertisers apparently do buy the hype expressed in Brooks' piece. Where the business has really changed, in my view, from the days when Ed and I were both at BBDO, is there now seem to be very, very few truth tellers left, sad to say.

  4. Doug Garnett from Protonik, LLC, July 9, 2015 at 4:47 p.m.

    "While TV’s late embrace of programmatic reaffirms the fact that the buying process works well,.." Really? 

    TV hasn't yet experienced what programmatic claims it will deliver (although my own sense is that it will never actually deliver it). So this is a vast overstatement. 

    TV writers and media sellers are hyped about a fad. Now, let's wait to see what truth emerges about it. The online truth about online advertising has finally emerged:  vast corruption and tremendous ineffectiveness. So the hypers have shifted to TV with programmatic - bringing, perhaps, the same qualities.

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