Programmatic has revolutionised online display advertising, and now it’s moving into other channels, with TV and outdoor advertising soon to be traded programmatically. Harriet Kingaby explores why this new means of buying and selling media means turning old models on their head.
As the digitisation of the out of home (OOH) sector continues, TV consumption patterns change and improvement in TV hardware allow for better data collection, programmatic media trading continues its revolutionary march across all sectors of the industry.
Last year, the Internet Advertising Bureau (IAB) reported that 28 per cent (circa £500m) of the UK digital display market was traded programmatically, and it predicts this will rise to between 60 per cent and 75 per cent by 2017. Although display is the most mature market, programmatic trading across most other sectors is also increasing, and TV and OOH are the next mediums to be talked about.
Importantly though, the characteristics and benefits of programmatic trading will look and feel very different to display.
‘Programmatic TV’ looks set to become an industry buzzword. The revolution in this sector will flip the traditional TV model on its head; instead of using programming data to find advertising placements, marketers will be able to use audience data gathered from set top boxes to find them. Unlike digital out of home (DOOH) and display advertising however, it is not a real-time ad buying technology, but a tool that enables better ad targeting to increase efficiency.
Digitisation of the OOH sector has been rapid and, according to PWC, looks to be revitalising it. According to Warc, DOOH accounted for 21.6 per cent of OOH spend in 2013 and can look forward to a seven per cent growth in 2015. The big opportunity for programmatic trading of DOOH is the ability to compare it with mobile and situational data. This allows identification of audience trends and therefore opens up creative opportunities for adverts to be rapidly placed and adapted depending on factors such as weather, individual flight arrivals and nearby sporting events.
Although much excitement surrounds the digitisation and programmatic trading of space in both industries, there are barriers to scaling both.
Scaling up TV in 2015
When discussing programmatic TV, it is important to distinguish what type of inventory you are referring to. Due to lack of industry faith in data and the high yields obtained by publishers when selling it, premium inventory on linear TV, such as an X Factor advertising slot, are unlikely to be traded programmatically any time soon. However, lower value inventory and video on demand (VOD) are seeing much greater interest.
The reason for this is simple. The existing system of up-front buying allows major networks to obtain high prices for premium inventory, creating little incentive for them to experiment with new ways of selling. Many cite the lack of quality of data available and ad fraud as reasons for continuing with the existing system. Understandably, they’re not keen to change a formula that works for them and advertisers fear losing exposure through experimentation, even if it would allow them to tailor, and therefore increase engagement with, their adverts.
Doug Ray, global president of Carat, puts it succinctly: “It’s about supply and demand; as long as demand is bigger than supply, there will be no systemic shift in linear TV.”
However, despite the spend and power it commands, linear TV isn’t the only inventory for sale. There’s also VOD and catch-up TV, where user sign ins and publisher collected data make targeting easier and give publishers more reassurance and control. Indeed, according to Warc, after mobile advertising, broadcast video on demand grew most of all the advertising sectors in 2014. Channel 4, for example, has recently set up its own exchange for VOD and, says Rupert Staines, European managing director of RadiumOne: “This is a trend that will increase over time as consumers move their video consumption over to mobile devices… programmatic is all about driving efficiency and effectiveness requires data and intelligence.”
Stuart Smith, the vice-president of client service at MediaOcean, cites Sky’s Adsmart as an industry leader: “Sky is in a unique position as it has the platform Sky box, and creates content and programmes too. That means it’s in a position to serve different people with different ads during the same programme. Compared to a Barb panel with half a million viewers, Sky can pull data from something like 11 million. However, of course, you’re still targeting households rather than individuals, so there will still be wastage.”
Simon Daglish, group commercial director at ITV, has notably been critical in the past of the use of secondary data to place programmatic ads. However, he is hopeful for the collection and use of this first-party data in providing a better all round experience for ITV viewers.
“We absolutely see the value of first party, permission based data, hence why we’re busy collecting it from our viewers with over seven million registered users of ITV Player already and growing fast. But that data is part of a willing value exchange between us and our viewers,” he says.
However, for the time being, for most, ‘dumb’ set top boxes do look to be a limiting factor in gathering data and placing advertisements.
Nicolas Bidon, managing director of Xaxis UK, describes the real winners in the short-term: “As the infrastructure continues to evolve and publishers begin to embrace the technology following demand from the advertisers, daytime TV and less valuable programmes will see more and more programmatic buying coming to the fore.”
Carat’s Ray also sees potential in niche cable networks collaborating with data services, saying: “Where we will see real growth is in the long tail low rated inventory, which today is undervalued and often bundled together with high demand inventory in order for the network to monetise it.
“The problem is that traditional ways of measuring TV ratings are survey based and when you get down to tiny audiences, the volatility of ratings and their ability to create a rating point falls off dramatically. With small niche cable networks, and particularly when you get to the daytime TV segments, audiences are so small that in traditional negotiations, we as humans can’t value it.”
Ray also predicts companies such as ABC working with Adap.TV and AOL to gather better data from new generation set top boxes to monetise these audiences.
Scaling DOOH in 2015
The digitisation of the OOH sector has transformed it. Digital screens allow much more flexibility than traditional posters and, when cross referenced with mobile phone data, can be tailored to their environment and audience in creative ways.
As James Davies, chief strategy officer UK and USA, Posterscope explains: “All those screens are interconnected and playable, so the capability that gives advertisers is significantly better than posters. They allow you to run real-time, dynamic creative and activate campaigns much more quickly. So you have all this new capability that comes with this connected medium.”
One example of this is the Stella Artois ‘Cidre’ campaign. Based on the insight that people are more likely to switch to cider when the weather is two degrees warmer than average, advertising space was only bought when the weather criteria was met.
However, Posterscope’s Davies describes how this is the exception, not the rule: “The industry needs to be able to accommodate lots of those campaigns running at same time. We need some pretty robust technology to allow us to do this, like they have in the online world, such as DSPs and teams in agencies to operate them.”
This is being addressed, but progress is slow. Gill Reid, head of out of home at MediaCom, describes how its recent VUKUNET programmatic direct platform trial was an exercise in streamlining the “end-to-end campaign buying and delivery process through an intuitive online interface, sending creative directly to digital screens, eliminating multiple manual processes and allowing clients and agencies to report on and optimise their campaigns in real-time”. Developing the platform would make the buying process more efficient, but more advanced platforms based on real-time bidding and auction models, such as ‘Vistar’ in the US, do exist outside of the UK.
In addition to the lack of robust DSPs, the availability of digitised real estate for programmatic trading poses the main barrier to growth. Markets such as Australia and Asia are advanced, but availability of this space in the UK outside London is limited. As advertisers seek to move with their consumers across multiple screens, trading systems improve and availability increases, it is clear that DOOH is an industry with enormous potential. Although these issues mean it unlikely to be the UK industry success story of 2015.
The scaling of programmatic trading of TV and DOOH require industry collaboration to improve data gathering and infrastructure. Advertisers, publishers and media agencies need work together to make more inventory available. Media and creative agencies must cooperate and broaden their skills sets to embrace a model of audience, rather than media trading. Indeed, considering advertising sectors in isolation seems dated, as consumers increasingly and indiscriminately consume media across multiple screens.
As RadiumOne’s Staines puts it: “We need to start and finish with trying to understand the consumer. They are constantly connected by multiple devices. The only way this industry will genuinely leap forward in terms of innovation, will be when we realise we have to operate as a system, not siloes. It’ll take time. All media will be, in some way, programmatically traded digitally because the fundamental part of the puzzle is the consumer, who is way ahead of the game.”
This feature was first published in The Drum's 26 November issue.