The Rise of Programmatic TV Explained in 5 Graphics

TV advertising is big business! With over 100 million households accessing traditional paid TV subscriptions, it’s no surprise advertisers are willing to shell out upwards of $70 billion each year for ads. It’s also a fairly predictable process since the traditional TV buying and selling model hasn’t changed in decades—until now. Programmatic TV is poised to transform the way TV is bought and sold. What exactly is programmatic TV? Simply put, it is an automated process for buying TV ads combined with data-driven technology to target consumers at the individual household level. Traditionally, TV ads are bought manually through upfronts, requiring emailed or faxed requests for proposals, insertion orders, and trafficking. Programmatic TV applies instantaneous efficiency models from digital advertising to TV ads served across devices, as well as linear TV ads served across over-the-top (OTT) boxes. Beyond efficiencies for advertisers and media networks, programmatic TV has the potential to be a win for brands and their consumers. Advertisers will be able to target viewers with ads specifically tailored to their interests, cutting out the noise from universally friendly or irrelevant ads. Here’s a quick look into what the programmatic TV marketplace looks like today and how it will rise in the years to come:

Cord Cutting Is Accelerating

table-pay-tv-viewer-and-nonviewer-share First, let’s set our minds to the right channel. According to a recent eMarketer report, a growing number of U.S. households are cutting the cable TV cord. By 2018, one in five US households will not subscribe to cable or satellite TV, a jump of 5.7% over four years. That rate is expected to accelerate in the years to come as cable and satellite providers steadily lose customers to connected TV options, like Hulu, Netflix, and YouTube.

A Marriage of Necessity

According to AdWeek, “The list of legacy media players making alliances with digital companies continues to grow. Disney put $400 million into Vice, NBCU invested $200 million into BuzzFeed and another $200 million into Vox Media, and Turner put $15 million into the tech site Mashable.” As more and more name-brand networks partner up with digital TV platforms in order to stay relevant to their viewers, they’ll be looking to take advantage of connected TV’s experience in programmatic advertising. Once networks hit efficiencies of scale within digital video buying, it won’t be long before the bean counters look to mirror the results within linear TV.

The Word on the Street Is Getting Louder

google-search-trend-programmatic-tv-history Think it’s all just hype? Google currently features more than 118,000 search results for “programmatic tv.” More than just a passing fad, Google research shows an upward trend of search history since late 2012, and Google’s Keyword Planner shows a 9,900 percent change in average monthly searches since September 2012. Similar terms, such as connected TV and addressable TV, are showing parallel results.

The Ability to Accurately Measure Cross-Device

With watchers spreading their TV time nearly evenly between traditional remote controls and the computer mouse, advertisers must be prepared to reach consumers on whatever device they are using. What’s more, those who are watching on their TV sets are likely multitasking, according to a new eMarketer report. Well over half of U.S. Internet users multitask with smartphones or computers while watching TV. As a result, advertisers will soon demand the ability to measure TV with the same effectiveness and accuracy that we do in other types of programmatic campaigns. Precision in cross-device video targeting, optimization, and viewability metrics will be critical to achieving programmatic penetration in the TV media market.

The Future Looks Bright

chart-us-programmatic-tv-ad-spending Today’s programmatic media is way beyond banner ads. Yet, programmatic TV has been slow to take hold. Only one percent of TV ad spends in 2016 were purchased programmatically. While this seems low, consider this: Iit represents $710 million of a $71 billion industry, and programmatic TV spending is expected to grow to over $4 billion by 2019! Others go so far as to estimate that programmatic will represent 17% of TV budgets in just two years. Regardless, if either reports are even close to accurate, the future for programmatic TV looks bright.