Big Upfront Deals Could Squeeze Programmatic Inventory

After an upfront season where buyers snapped up CTV inventory, programmatic buyers are concerned that there won’t be much left.

This spike in digital video deals, along with a post-pandemic decrease in viewership, could make it difficult for advertisers to access programmatic inventory in the fourth quarter of 2021 and beyond, according to agency and ad tech executives who spoke to AdExchanger.

During this year’s upfront, buyers increased CTV ad spend by nearly 50% from last year to $4.5 billion, according to eMarketer. CTV sellers like Disney, Roku and NBCUniversal touted record commitments this year, fueled by digital video and a slew of new ad products to entice marketers to their respective streaming platforms.

While there’s been a rise of ad-supported streaming platforms over the past year – such as Peacock, Paramount Plus and HBO Max – these streaming platforms are also vying to attract users and advertisers with their low ad loads. Platforms such as HBO Max and Fox’s Tubi pledged to deliver the lowest ad loads in streaming.

“I think Q4 is going to be wild,” Kelly Metz, managing director of linear activation at Omnicom Media Group, told AdExchanger. Since most programmatic buys are made via private marketplace [PMP] deals, “you needed to be really savvy about using your upfront dollars as a point of leverage to gain access to PMP deals programmatically with all of the key premium content providers.”

“There was a lot of digital being wrapped up into these [upfront] deals where it hadn’t been in the past,” Vicky Chang, director of data-driven media planning and buying at TV ad agency Tatari, told AdExchanger. “I think all clients are going to be concerned about getting premium inventory and programmatic inventory. If that inventory is being taken in the upfronts … the prediction would be that it would affect programmatic inventory as well as OTT inventory across the board.”

Increased competition is making it difficult for advertisers to purchase remnant inventory in OTT, or unsold ad impressions that can be purchased last minute, according to Tatari, which buys TV campaigns and provides data and analytics services.

Remnant OTT inventory is not guaranteed because advertisers can outbid each other for CPM impressions. Marketers may be unable to secure as much inventory as they wanted at a particular price. The average clearance rate – or number of winning bids – among Tatari clients dropped from 86% in April to 40% in June.

“This isn’t something we’re gravely concerned about, but it’s something we have to keep a close eye on,” said Jesse Math, VP of advanced TV and video solutions at Tinuiti, told AdExchanger.

One reason Tinuiti wasn’t gravely concerned was seasonality. There were fewer impressions in the marketplace due in part to a decline in viewership at the start of the summer, as well as a lack of new and original programming on streaming services. So advertisers had to compete for what remained.

There are a number of factors coming out of what he called the strongest upfront ever that could limit leftover inventory that moves to the programmatic marketplace, Math said, including networks’ “make-good” commitments associated with ads that weren’t seen by the guaranteed number of viewers, a post-pandemic decline in viewership, and fragmented viewership across multiple AVOD platforms – which could make it harder to scale and cause supply constraints as individual platforms compete with each other.

With so much premium CTV inventory being sold in the upfronts, not much is being made available in biddable environments.

“Programmatic buyers have to be concerned about how many impressions, how many ad opportunities, are going to trickle down the waterfall to the real-time programmatic marketplace, and that will be especially pronounced in Q4,” Math said. “If you know you want to be competitive in Q4, consider getting into your programmatic guarantees – or just your guarantees – in now.”

Inventory scarcity often leads to higher CPMs. Ironically, the brands most well-positioned to absorb those costs are brands such as auto, CPG and beverages that have traditionally been active in the upfronts.

It’s the newer brands too small to play in the upfronts that need to worry.

“Brands that have to develop specific strategies now around these changes are direct-to-consumer brands and a lot of retail that traditionally haven’t been big upfront spenders but are thriving in the programmatic space,” Math said. “They’re not going to get locked out, but we do have to strategize specifically based on a set of circumstance we’re confronting.”

Big upfront advertisers often get better private marketplace deals and the premium content they’re seeking on CTV, Metz said. If marketers didn’t lock in more flexible options around media placements for CTV, they could feel the pinch. Brands that didn’t secure any upfront deals or programmatic guarantees may be forced to buy a lot of display programmatically because they can’t afford expensive CTV inventory.

“How much are you willing to pay? Did you lock in beneficial rates via your upfront deals? How strategic were you about being able to move deals fluidly and manage them holistically?” Metz said, naming factors that affect how brands will fare in accessing CTV inventory. “The deeper you've gone in your partnerships with the network programmers, the more likely you are to be successful this Q4.”

The optimist camp

While Q4 could be tight, if a streaming service acquires viewers beyond what they projected, they may have more ad inventory to sell.

The increase in the number of new AVOD services like Peacock, Paramount Plus and HBO Max could be positive news for the programmatic marketplace in Q4, because more inventory might be available “that wasn’t planned for,” Metz said.

And don’t discount creativity. While ad loads are lower, programmers can also concoct new types of ad units. “The shift to AVOD will force services to rethink the ways in which they deliver ads so they don’t need to sacrifice inventory for viewership,” Anthony Capano, North American managing director of Rakuten Advertising said, citing Hulu’s pause ads.

If CTV inventory will be tight, it may not affect the biggest players who often have early dibs on inventory due to their large buying power.

While there are typically some inventory constraints during Q4 due to increased demand, “we haven’t heard any concerns by our CTV publishers around lack of inventory,” said Esra Bacher, GroupM’s programmatic investment lead.

GroupM worked to lock in flexible upfront deals for clients. Programmatic deals will run in private marketplaces as opposed to open exchanges, Bacher said.

“We're buying from the networks directly and not looking to open exchange or curated deals to source supply,” she said, a move that insulates it from some of the programmatic supply shortages. “We're creating closer connections with the networks to ensure that we’re able to secure supply in a more upfront-like way, but still get the ads to the viewers via programmatic execution.”

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