Forrester Analyst: Don't Call It 'Programmatic' TV

The television advertising business is “at long last” beginning to see some of the change that’s been anticipated for so long. But calling those changes “programmatic” is, at least at this stage, far off the mark, says Jim Nail, principal analyst at Forrester.

The title of Nail’s new report, which he summarized during a webinar hosted by 4C Insights this week, declares his preferred terminology for what’s really happening: “TV Planning and Buying Goes Data-Driven and Audience-Based.”

The term “programmatic” took hold in the television arena because the industry assumed that TV ad buying would evolve just the way it’s gone in digital media: selling impressions at low cost, via real-time auctions, employing lots of data. But TV can’t and won’t replicate digital media’s course because the two have fundamentally different challenges, he said.

TV And Digital: Different Problems, Different Evolutions
Digital media’s problems were hard-to-monetize excess inventory; direct sales’ inability to operate at the speed required in digital; and the dominance of Facebook and Google, thanks to their overwhelming scale.



In contrast, television has a much better inventory supply/demand balance: At present, there’s still higher demand than supply in prime time, which is driving high CPMs. TV’s real problem is “transaction friction,” Nail said: It’s still operating in the direct-selling mode, with a lot of manual transactions, which is impeding its ability to respond optimally to digital media’s siphoning off of ad dollars. However, given the high value of prime-time TV inventory, in particular, and inventory owners’ fear that programmatic buying will drive down pricing, it’s not surprising that it took them so long to “even dip a toe in,” he said.

There are some opportunities in automation: Local stations might arguably be able to realize higher CPMs on their spots within prime-time programs, or even remnant inventory if aggregation of local buys across the country were streamlined, he said. But the television business, by and large, is still doing very well, which again translates to little motivation to shake things up, Nail said.

Another reason that TV isn’t exactly mimicking digital media’s course is that the still-small scale of addressable-by-household TV, even in streaming, doesn’t yet warrant much of inventory owners’ focus. In addition, “for all of the friction, [inventory owners] still believe that sellers have more control over pricing when they’re operating in the direct selling model,” Nail said. Not to mention that the legacy infrastructure used by networks and stations is pre-Internet, and far from capable of handling the real-time data exchanges standard in digital media.

Moreover, “much as people like to complain about ratings and Nielsen, nobody’s in a hurry to rip them out of the system” because of the disruption that would cause in the well-established buying, reconciliation and settlement system that uses ratings as the core currency, Nail added. “And again, there’s that fear [among inventory owners] that change could lower prices.”

He confirmed that the networks’ approach to the so-called “programmatic” initiatives being announced is very much geared to ensuring that they fully understand the implications for their business before deciding how broadly to offer these options — and that such transactions will be largely limited to private marketplaces for some time.

For example, he said, prior to this year’s upfronts, NBCUniversal SVP Aaron Radin told him that for its pilot programs, the network was seeking a limited number of client and agency partners “who really want to lean in and learn with us.”

Nail also underscored the current lack of automation in television by noting that Joshua Summers, CEO of audience-based TV ad sales platform clypd, recently said that the order files and schedules clypd generates must often be manually loaded into legacy platforms that lack direct integration capabilities.

TV’s Eroding Advantages Spurring Audience Buying
Up to now, three advantages have insulated traditional TV advertising from change, Nail pointed out: The ability to deliver audiences at scale at specific times (even as that scale continues to decline); the well-honed legacy planning and buying processes and skills that allow implementation of massive campaigns with a relatively small amount of labor; and the storytelling power of video, once exclusive to TV.

These advantages are, of course, now being eroded by audience fragmentation across media and platforms and time-shifted viewing, as well as the availability of video on all kinds of devices. And it’s the shrinking scale of traditional linear TV audiences that’s driving demand for the ability to buy TV using audience data beyond standard age/gender demographics, he noted.

In short, in television, “programmatic” is for now primarily going to mean use of a lot more data to identify and reach prospects for specific products and services — a direction being seen in the acquisition of data companies by Nielsen and comScore, among other developments, Nail said.

And automated use of analytics to harness the hugely expanded audience data now available through set-top boxes, alternative viewing platforms, data suppliers and overlays will mostly happen in the planning, rather than buying, process, he stressed. So despite the barriers to automation in implementing buys, data-driven planning tools will have a big impact on the nature of buys going forward.

As one MVPD executive noted, “we make the pitch to use the data in a post-campaign analysis. We provide data … on the optimal media exposure and strategy. If they can optimize their linear buys just 10%, it can generate big savings.”

Audience-based or index-based buying will enable reaching more prospect households for the same or fewer ad dollars, Nail declares. “That’s a huge value to TV buyers — and it’s not really a big stretch from some of the current processes and ways they think about buying TV, so it’s much easier to implement than [blowing] up the world [by going] to a fully programmatic system, in the digital media sense.”

Entrenched Practices, Fears Among Biggest Hurdles
But even the audience-based buying half of the equation won’t happen with a flip of a switch, Nail cautioned. Agencies are still afraid that media companies will jack up pricing if they’re told too much about clients’ targeting strategies, and media companies still fear that advertisers will try to cherry-pick their inventories without paying more. “I’ve begun to see some momentum in resolving this, but it’s going to take some time,” Nail said.

Also, “advertisers have to learn new audience-definition processes,” he emphasized. “The idea of the 18-to-49 audience is so engrained that it’s not so easy to get them to think about how to define audiences more specifically, and then what kind of data can connect them to those audiences.”

And while agency media buyers are analytically adept, more advanced data sets and targeting will require new levels of sophistication. “They’ll need to super-size their analytical skills,” Nail said.

Both digital and television pros will have to learn each other’s businesses to realize the benefits of advanced television buying, he added. “If you’re a digital person thinking you’re going to take over TV, you’ve got some [learning and] work to do … and if you’re a TV person thinking ‘No one will ever buy TV the way I buy TV,’ it’s also time for you to think about what you need to do to upgrade your skills and knowledge.”

Remaining roadblocks to evolving TV buying, he noted, include the data standardization needed to enable automated transactions, and the improved inventory forecasting needed to predict granular audience delivery. Nail expects the infrastructure consolidation needed to create a broader planning platform to happen fairly quickly, but entrenched business practices to evolve more slowly.

He quoted a media agency executive who observed that when it comes to “programmatic” television, “we’re not even in the first inning yet. We’re still singing the national anthem.”

4C’s Josh Dreller also presented the company’s new platform, designed to enable integrating social media intelligence in TV audience buying, in this webinar. More on that in a future column.

3 comments about "Forrester Analyst: Don't Call It 'Programmatic' TV".
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  1. Ed Papazian from Media Dynamics Inc, September 23, 2016 at 3:02 p.m.

    An excellent report, Karlene. I've been saying many of the same things for several years so it's good to see that a more realistic and less blatently promotional evaluation of "programmatic" buying for TV is taking root.

  2. James Nail from Forrester Research, September 23, 2016 at 4:06 p.m.

    Thanks Ed! We should compare notes.

  3. Chris Peterson from Rain the Growth Agency, September 24, 2016 at 12:31 p.m.

    One of the big questions about programmatic TV today is if the advanced targeting achieved by the new data sets more than compensates for the incremental cost. In other words, to what degree are the older tools failing? The new data sets look really great, especially when connected TV data is combined with data from the larger data vendors, but if the incremental efficiency in reach is 8-10% (which are numbers I've seaen quoted by programmatic TV vendors) and the incremental cost is actually much higher than that, what do we have? As poor as the current tools are, the lack of addressable inventory means we are getting a better index. That's great, but the cost of a better index can't be very much for it to make economic sense. As you say, it's early days, which means it's also the most exciting time to be involved. For those who thrive on change, it feels a little like the early days of digital. I do believe you will see acceleration in change in how TV is planned and bought. The driver short term will not be automation for all the issues you point out. The driver will be the evolution of using new data sets and first party CRM data for better index targeting assuming the economics get in line. The other driver will be the rapid evolution of advanced analytics that will show TV's power relative to digital and what's driving revenue and market share within the TV buy. This last piece is happening outside of the TV and digital ad tech ecosystems as it is more top down, but it is absolutely getting better and better and could possibly trump the ciurrent advanced targeteing or components of it. We'll see. 

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