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Last week, eMarketer released projections on the growth of programmatic TV buying, citing increases of 75.7% this year, an additional 85.2% in in 2018 and a further 82.1% in 2019. While this sounds astronomical, in terms of programmatic's total share of TV buying, it actually represents a shift from only 1.6% this year to 5.0% in 2019.
Of course, this is nothing to sneeze at, but there are a number of issues that programmatic must address if it is to capture a significant portion of the market. These include a limited number of sellers (compared to digital), a perishable GRP inventory, the necessity of bundling programs and discounting packages under the current system, and creating viable targeting refinements that can mimic the precision which makes digital programmatic buying so appealing.
Media Dynamics, Inc. addresses these issues in a new report from its Media Insights & Research Service, entitled "Programmatic Buying: Is It Right For TV?". This report, available for only $120, includes a review of the development of programmatic (automated) buying in digital media and its attempts to move into television. The basic needs of TV ad sellers and the pitfalls hindering their acceptance of programmatic are discussed in detail, along with recommendations about revisions to existing programmatic systems that might create a better fit with the realities of linear TV buying and selling.
Advertisers now spend approximately $76 billion annually on television. Of this, local market "spot" buys on broadcast stations and cable account for 41%; quarterly "scatter" (periodic as-needed purchases on the broadcast TV networks, cable channels and national syndication in all dayparts) makes up 16%, and the remaining 43% is negotiated in so-called "upfront" deals. The upfront includes primetime entertainment fare on the broadcast networks and national cable channels, as well as early morning, daytime, news, late night and some sports sponsorships. The primetime portion of the upfront constitutes only 25% of all TV ad dollars, but it garners the most attention and is the subject of much speculation and controversy.
In recent years there has been a lot of criticism of the upfront—by which is meant the primetime upfront—driven primarily by advocates of digital media and automated ("programmatic") time buying. Because so many upfront buys are based on seemingly archaic demos like adults aged 25-54 or men aged 18-49, critics lambaste this "outmoded" system for its lack of "granular targeting" precision. Abuse is also heaped on Nielsen for the "small" size of its peoplemeter rating panel (recently increased to 40,000 homes) and the lack of "transparency" that denies advertisers full knowledge of the sellers' price ranges and whether their time buyers are getting the "best" deals.
Critics of the upfront are stymied by the fact that so many national upfront negotiations represent the combined requirements of all of an advertiser's brands, often including 20-30 brands in a variety of quite different product categories. Anyone can see that even if each brand's targeting definitions were taken into account, the only way buyers could factor these preferences into a single corporate buying currency would be to average them. Unless most or all of the brands had virtually the same consumer user signature, the resulting average demo would probably be no better than 18-49 or 25-54.
Another problem that critics of the upfront must confront is their failure to appreciate the true relationship between buyers and sellers. Most national advertisers are wedded to TV as their primary communications platform. While digital media and other options—magazines, radio, etc.—are available, many advertisers believe that they must be strongly represented on national TV, despite its rating fragmentation and commercial zapping issues. And the sellers know it. Except for an occasional "buyer's market," caused by depressed economic conditions, the sellers rule. They may make concessions here and there and occasionally grant favors to friendly customers; but overall, the sellers dictate the way time is sold. And they have no intention of turning over their masses of GRP inventory to eBay-style open auctions where everyone knows what the prices are, and the buyers can cherry pick time in whatever programs they want, whenever they decide to make a purchase.
Because they manage a perishable inventory of GRPs and must garner the maximum ad revenue yield across all their shows, TV sellers offer time in discounted package deals, mixing in the most preferred programs with their many so-so entries and outright flops. This succeeds because the cost per viewer—even a meaningfully targeted one—is lower than what the buyer would have paid had only the "best" programs been available. The sellers make certain of that.
Media Dynamics, Inc.'s new Media Insights & Data Service offers a detailed analysis of why the upfront is still necessary, including an exploration of the key benefits to both buyers and sellers. It also explores recent attempts to "reform the upfront" and how recent advances in audience research are impacting the process. Finally, the report concludes with detailed recommendations on how advertisers might get more value from their upfront purchases while operating within the current system, including tables showing how the process could work. The complete report is available for only $120.
(MDI will be releasing further reports on the 2017 upfront in the next month.)