January 25, 2023
Commentary
Digital Ad Marketplaces Don't Work For TV
- by Dave Morgan , Featured Contributor, January 24, 2019
For years, folks in the ad industry have talked wistfully of the day when TV advertising would be bought through automated online interfaces on auction-based bid marketplaces, as search, social and digital display advertising have been bought since the middle 2000s.
And some folks have done more than just talk. In 2003, a start-up called SpotRunner launched an online marketplace for local TV ads. It was shut down before the decade was out.
In 2007, eBay tried to create a TV ad marketplace, but it never even made it to the launch pad.
Also in 2007, Google created an online marketplace for TV ads, only to shut it down five years later. Microsoft bought a TV ad-tech company, Navic — or its Admira TV ad marketplace — but it didn’t make it much past 2010.
What gives? Why have some of the world’s largest tech companies failed at bringing marketplace technology to TV?
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To me, the answer is pretty straightforward. Just as everything is a nail to a hammer, to most digital ad-tech companies, all media is like digital.
Except, as anyone who truly knows TV knows, the world of TV advertising is nothing like digital. Here’s what I mean:
In TV advertising, demand exceeds supply. TV has a futures market, the upfront, because more advertisers want guaranteed placements on TV than there are placements to be sold. Thus, they must reserve them and lock in pricing many months in advance.
Digital doesn’t work that way. The vast majority of digital ads are not actually bought until a millisecond before they are served, or the availability perishes.
Real-time systems operate totally differently than futures systems do. Virtually all of the core ad technology that powers digital marketplaces — bidding, ad serving, optimization, demand-side platforms and sell-side platforms — operate on a real-time “waterfall” system, and have at their core real-time decisioning engines that optimize against an addressable media unit.
The digital ad-tech systems that can make the most optimal decisions against the largest pool of addressable units (browsers, apps, mobile phones, etc.) in the least amount of time win.
Not so in TV. The value — and optimization potential — in TV advertising is in the future, and the transaction unit is a TV spot. The vast, vast majority of TV spots are not addressable.
Thus, the purchased unit has to be viewed as a portfolio, not a person or browser or app, since every TV ad spot represents thousands or millions of different people that have different duplication and relative cost relationships to every other one of the spots available on TV during a campaign (every day, there are more than 250,000 spots on national TV).
Trying to predict and optimize TV ad campaigns with digital ad-tech systems is like trying to predict tsunamis off the coast of Indonesia six months in advance by sticking your hand out your Manhattan office window 10,000 times per second. Good luck with that.
TV networks have nothing to gain by exposing “unsold” inventory. Why do TV networks have special deals in place with direct-response advertisers, many of whom pay much lower rates than large brands do?
Because the structure of most of those deals permits the networks to preempt those ads at the last second with higher-paying ads, and having them in place guarantees scarcity of available impressions. That dynamic is critical in maintaining TV as a supply-constrained market.
In that world, TV networks gain nothing from exposing the volume or pricing of their unsold, or under-sold, inventory to buyers. In the digital ad world, publishers must push their “avails” information and status directly into the buyers’ interfaces, to be picked off at the last moment.
In the TV world, it is the opposite. Buyers’ demand — the amount that advertisers or agencies are willing to bid and pay for specific TV spots or audiences — needs to be pushed all the way into sellers’ interfaces, with sellers able to unilaterally accept or reject those bids each and every time.
This mismatch between the interests of TV sellers, and the design and operation of digital ad-tech systems built for a marketplace where buyers rule, is one of the most fundamental reasons we’ve seen so many digitally inspired marketplaces fail in the world of TV advertising.
Will all this change? Will we see marketplaces purpose-built for the TV ad ecosystem? For sure. It’s an area I’ve been personally focused on, and we’ve heard from a lot of the large TV ad market participants like AT&T’s Xandr and Comcast that they’re headed there, too. This will be fun to watch.
What do you think?
3 comments about "Digital Ad Marketplaces Don't Work For TV".
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Yes Dave- pretty obvious at this point. TV is only going to have an automated solution if it benefits the sellers. Every over eager Advanced TV entrepreneur who has come from the digital side has failed. Yup.
There are nuanced approaches entering the marketplace as we speak that will have a real chance of succeeding. But if the TV nets do not have total control of the process, you’ll never be able to buy national TV inventory at scale.
If the TV nets don’t start working on a solution over the next 6 to 12 months, TV just may end up sliding down the slippery slope and being controlled more by the buy side. The threat is very real. Time to grab the bull by the horns.
I couldn't agree more, Long. The assumption that TV time sellers were helpless pawns---like many internet website "publishers"--and could be manipulated by "advanced" and automated systems that totally favor the buying ---and tech---side was and still is an illusion that has stymied the "advanced digital entrepeneurs" trying to grab control of those TV ad dollars. I believe that at least some of the sellers---NBCU, for example---understands that new approaches must be developed---but only if the sellers as well as the buyers benefit. In this regard, we should all be paying close attention to NBCU's premium break/ low ad clutter/high impact and CPM initiative. Here, there is no need for "outsiders" to favor one side over another and try to profit by it as everybody gains---the seller by earning more ad revenues and the advertiser by scoring much higher ad impact.
This is awesome. Thanks for baking this all into one piece. One additional aspect I consider when thinking about programmatic TV is that TV spots require EXPONENTIALLY more up-front creative production investment than your typical digital ad creative (e.g., web display ad). The high up-front cost of TV commercial production is then bound to affect the way that agencies and advertisers deploy TV media budgets.
With virtually ANY potential production project (whether it be a new iPhone or a new TV commercial), as a business' up-front investment increases, the imperative for future planning (ROI modeling, etc) and risk mitigation increases commensurately. This makes it somewhat untenable to expect advertisers to dump 6, 7, or 8 figures up front into producing TV commercials while on the other hand media cost, reach, etc are a moving target that changes in real time. It turns the whole medium into too much of a gamble (granted, programmatic buying has plenty of techniques to mitigate this, but the basic economic assumptions are clearly in conflict).
And the medium of TV itself practically necessitates high creative production cost--this equation can't simply be rebalanced by expecting advertisers to produce "cheaper" commercials just because the media is being bought in real time. Low-budget commercials would be obvious to viewers and would cheapen and undermine the brand, thus negating any reason to invest media dollars in TV in the first place.