“On TV And Video” is a new column exploring opportunities and challenges in programmatic TV and video.
Today’s column is written by Jonathan Bokor, senior vice president and director of advanced media at MediaVest.
Although a commonly agreed upon definition of programmatic TV doesn’t exist yet – making it perhaps the most abused term in advertising these days – most industry players agree that it encompasses using data and technology to make TV advertising more precise via improved targeting and more efficient via automation.
Cable, satellite and telecommunications TV operators, also known as multichannel video programming distributors (MVPDs), control valuable data and are in a position to deploy key technology, putting them in the best position to bring scale to programmatic TV.
Set-top boxes, owned by MVPDs and leased by their subscribers, remain the dominant source of viewing and tuning data in the roughly 100 million US households that pay for a traditional TV subscription. Set-top box data is critical to moving beyond the age and sex demographic targeting that has dominated TV for the last half century.
This data is so important because once you’ve identified a target segment that you want to reach with a programmatic ad, you need to know where that segment can be found, and set-top box data is key to finding them. Although there are a few “independent” sources of set-top box data, for the most part these sources license it from the MVPDs, so as a group, the MVPDs hold a very strong position in terms of TV data.
A Foothold Through Technology
The situation on the technology side is more mixed, but MVPDs hold a key advantage there as well in that only they can enable targeting to individual households in “traditional” TV. Unlike the Internet, where third-party ad serving is commonplace, pay TV advertising is served exclusively via the MVPD’s infrastructure. True household-level targeting in “traditional” TV isn’t possible unless MVPDs deploy technologies that allow targeted ads to be served to each household. And once MVPDs deploy that ad-serving technology, they will obviously have the power to grant or deny access to it – for a price.
To date, MVPDs have been cautious in their approach to exploiting their advantages in both data and technology. A number of them have deployed addressable TV to enable advertisers to target audiences on a household basis, although these buys aren’t yet programmatic because while they are precise, they’re not yet automated.
Forward-thinking agencies and clients are leaning into addressable TV since it represents the clearest path to programmatic TV at the household level. But MVPDs are retaining their leverage by limiting the capability to their own inventory and, for the most part, have not made it available to TV networks to enable audience targeting on national broadcast and cable inventory.
Undoubtedly MVPDs will want to be compensated for granting that access, and the negotiation of those terms will be tough and protracted. Without agreements that allow TV network ad inventory to leverage MVPD data and technology to power programmatic buying, it will be difficult to bring enough scale to the marketplace.
It will be difficult, but not impossible. Many of the emerging entrants in precision TV are enhancing an existing targeted buying process that doesn’t serve ads targeted to individual households, but instead identifies networks, dayparts and programs that overindex against a more granular target audience than an age and sex demographic. Since all viewers of a program see this type of “optimized” ad, instead of only those households that are in-target, it isn’t as efficient as addressable TV, but it’s more efficient than traditional age and sex demographics.
Optimization typically uses local MVPD inventory, in addition to local broadcast and national cable, so once again the MVPDs retain leverage by virtue of their ad inventory.
Don’t Forget About Over-The-Top TV
Based on the foregoing, you might think the MVPDs are in an all-powerful gatekeeper position with respect to programmatic TV, but there is one important alternative: over-the-top television, such as CBS All Access and SlingTV.
Since over-the-top is delivered via the Internet and can use Internet ad tech, it doesn’t need to rely on MVPD data or technology to enable household-level or even one-to-one targeting. Even more importantly, over-the-top’s ability to leverage Internet ad tech and thus enable cross-screen programmatic video via a common architecture opens up many possibilities for common measurement, attribution and optimization.
This is why ad-supported over-the-top offerings like SlingTV and Apple’s rumored over-the-top product are so intriguing to agencies and advertisers. Unfortunately, right now over-the-top television doesn’t yet have enough scale to deliver on this promise, since ad-supported services are still emerging and have relatively few subscribers.
So until over-the-top television gains a sufficient number of subscribers to solve its scale problem, MVPDs remain in a strong position by virtue of their set-top box data, household-level ad insertion potential and ad inventory.
They have an opportunity to use that position and the leverage it brings them to negotiate favorable deals with TV networks, programmatic TV technology companies and agencies for access to their data, technology and inventory. But if they overplay their hand by pressing for too big a slice of the pie, they will only further incentivize TV networks to embrace over-the-top as an alternative pathway to programmatic TV.