February 24, 2017

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Programmatic buying: How Linear TV advertising can stay relevant

The evolving advertising landscape
Due to the proliferation of new-age devices and media platforms, viewing habits have undergone a sea change. In today’s fragmented landscape, advertisers are progressively demanding more accountability. According to Forrester, programmatic buying will dominate the digital advertising landscape in the coming years. In 2015, the digital advertising budget grew by over 16%, as against the 5% increase in Linear TV advertising budget. For decades, TV enjoyed a majority share of advertising revenues, but the following factors have contributed to its decline –

  • The planning and booking of TV ads is a time-consuming process, due to request for proposals (RFPs). A lot of manual effort is expended in inserting orders, ad trafficking, and exchanging emails.
  • The spot booking of ads lacks accountability and is subjective as it’s done by account executives, who are driven by experience.
  • When advertisers are striving to reach out to individuals, the practice of targeting viewers on the basis of age, gender, and GRP falls short.
  • The traditional GRP ratings is now considered insufficient. Rating institutions, like Nielsen, extrapolate 20,000 US households in order to represent the 115.89 million TV owning homes.

TV advertising is scarce and has high addressing capability. Hence it is sold at a premium cost. But due to increasing audience fragmentation, buyers are beginning to depend on optimized and automated processes. Here, programmatic advertisement is the solution that delivers more options while subsequently driving down sole dependency on GRP ratings and basic demographic indicators.

From traditional ad-buying to programmatic ad-buying: The three phases
While the advantages of programmatic advertisement are evident, the believers in traditional ad buying system for Linear TV are skeptical and reluctant about adopting it. Broadcasters and distributors maintain a high degree of control over the inventory, ensuring that none of it is undervalued. Therefore, in order to effect a change, both advertisers and broadcasters must collaborate. Moreover, the transition from traditional ad buying to programmatic advertising can occur in three phases –

  • Programmatic advertising through hybrid approach: In the initial stages, a hybrid approach for analyzing data across platforms and devices should be deployed. This will result in delivering the most relevant spots to each campaign. Consequently, buyers will enjoy enhanced optimization through decision making based on unified data collected across TV as well as digital platforms. OTT videos and connected TVs will help monitor the viewing habits across households by tracking logins, IP addresses, and device IDs.
  • Programmatic advertising in Linear TV for regional targeting: Today, buyers are seeking a more accurate method of being allotted ad spots that goes beyond just age, gender and GRP ratings. They are striving for a better system that can deliver higher returns on investment, reach out to target audience, and increase the chances of conversion. However, such a scenario requires the adoption of Programmatic TV (read our whitepaper on “Programmatic Buying in Linear TV”, to know more). It’s a disruptive technology that automates the process of viewer based TV advertising through new software platforms, with a two-pronged approach –
  1. Automated booking for ads: The buyer initiates the process by stating the budget, campaign timing, and target segment characterization. The system uses algorithms to align the inputs with available data in order to generate the most suitable list of available ad spots. As this process requires minimal manual interference, it is cost-optimized and timely.
  2. Data-driven targeting: This goes beyond standard demographic focus and leverages the data obtained from millions of household set-top boxes, facilitating granular targeting. The findings reflect viewing habits more accurately than the age-old practice of deriving results from a sample size of a few thousands. Factors that were hitherto not emphasized, such as household income, ethnicity, presence of children, education level, are now playing a crucial role in determining ad spots.
  • Addressable advertising through personalized targeting at household level: Addressable TV, a subcategory of Programmatic TV, enables ad broadcast at a household level. It empowers advertisers to purchase individual impressions rather than ad spots. Providers can insert ads at the set-top box level in order to deliver customized ads for the same program at multiple households. As a result, the audience has a personalized viewing experience due to greater content relevancy and advertisers enjoy increased efficiency by streamlining budgets.

Delivering engaging and engrossing content

Linear TV advertising should strive for continuous innovation and disruptive business model adoption in order to stay ahead of the digital space. It’s also essential to dissuade viewers from switching channels during an ad by broadcasting progressive and contextual ads –

  • Progressive ads: The set-top boxes help providers to understand what interests a particular household by monitoring viewing habits. This information can be leveraged to deliver progressive ads providing additional and more detailed information about the brands in a time-phased manner.
  • Contextual ads: Marketers can use artificial intelligence (AI) to determine the preferences of each member of the household. By deploying analytics tools, influencers can be identified and subsequently targeted with specific ads based on their preferences.

In order to remain relevant in the perpetually expanding and chaotic ecosystem, broadcasters must adopt programmatic ad buying. Programmatic buying offers the potential to transform market from the existing broad segment based buys to finely-grained individually targeted buys.