Two regional ads for Oreo and Ritz broke important TV-advertising ground this year, becoming the first brands to buy programmatic ads during the Super Bowl. While the audience for the ads was small – the 100, 671 residents of Erie, Pa. – they went down as a marker in the evolution of how important programmatic is growing in the TV industry.

While TV ad buying has always been based on purchasing a mass audience, programmatic buying is flipping that equation upside down by its very definition: it’s a technology that targets consumers based on metrics obtained by algorithms; for instance, people who are shopping for cars, having babies, sending their kids to college, and so on. The rise of digital and all of the data attached to it is what, in large part, has made TV programmatic possible.

Still, this solution has a long way to go. The act of automating ads to appear before precisely targeted audiences at different points in the purchasing funnel is still too dependent on sometimes questionable third-party data and technology that is still contains significant snarls. Nonetheless, it’s an outlet that industry experts are paying attention to.

Tracey Scheppach, EVP, Precision Video at Starcom Mediavest Group, is one of those people, describing programmatic as having “come of age.  It’s no longer a small opportunity or adjunct component of ‘the buy.’” In fact, Sheppach calls programmatic “critical” for TV advertising because when it finally reaches its potential, it will likely help a lot of networks find ad dollars that they had not been able to monetize before. Indeed, AOL has reported that only 8% of ad execs were buying TV ads programmatically last year but about 12% plan to increase their spending this year, according to eMarketer. A study from Magna Global predicts that programmatic digital spend is expected to grow to $53 billion worldwide by 2018 from an estimated $21 billion in 2014, according to the New York Times.

Alex Hood, VP of Product at digital-ad-platform TubeMogul, says this is already happening. His company’s programmatic TV offering, PTV, aggregates potential ad spots to be filled programmatically from more than 80 major cable networks and hundreds of local broadcasters. “On a test we ran for 3M, for instance, 87% of total impressions were on top ten networks and almost one-third of that ran during primetime,” he said.

Helping matters is the proliferation of HDTV in American homes. According to Nielsen’s U.S. Digital Consumer Report, the majority of U.S. households had HDTV as of early last year. That kind of technology in so many households provides ad agencies and TV networks with a veritable flood of data to shape and package when selling programmatic.

“A decade ago, consumers bought cereal based on taste, how the box looked, or if it came with a prize,” said Scott Schiller, EVP, Digital Advertising Sales, NBCUniversal. “Now, it’s all about the data: how much fat or fiber? Is it gluten-free? Lactose-free? In this fragmenting landscape, data is definitely here to stay and the demand from marketers will certainly grow.”

Ironically, it’s the data itself, however, that’s often riddled with flaws. Alan Smith, Chief Digital Officer of media agency Assembly (whose clients include Timberland and New York Life), notes that much of the inventory available to advertisers and the third-party data being used is not of the highest quality. “This data has been tested in media campaigns and, in many cases, it often performs poorly because the data has been packaged as one audience, but may in fact not be that audience at all,” Smith said. “This is a real challenge for brands if the buyer often doesn’t have a lot of context on the data’s quality.” Others echo Smith’s comments. Stephano Kim, SVP Ad Operations and Chief Data Strategist, Turner Broadcasting Ad Sales, notes, “Targeting and optimization models based on available data sources are still unclear when it comes to accuracy. But performance is still far better than traditional planning methods from what we see.”

Then, of course, comes the impediment of fraud. Research firm Integral Ad Science found in a study released in late April that ad fraud in programmatic display ads was 16.5% and 14% in video ads. “You could see as much as 50-60% of your budget wasted,” Smith said. Even more frustrating is that the problem probably won’t be resolved anytime soon. Google’s Spider.iO, Integral Ad Science, and Double Verify are just three of the companies attacking these issues through speedier bot detection, searching for fraudulent patterns, and site overlaps, but fraud remains problematic.

Also relatively immature is the technology, infrastructure, and workflow process when it comes to programmatic, according to Mike Peretz, EVP, Revenue Management & Operations, at A+E Networks. As data continues to break down the behavior of viewers watching different programs on different networks, programmatic will become more actionable. But as of now, there remains a disconnect in harnessing programmatic’s power successfully in order to fully automate the ad-placement process, Peretz said.

Dan Ackerman, SVP, Programmatic TV at AOL’s Adap.tv, notes that consumer viewing is screen-agnostic, so work also still needs to be done to bring digital and TV buying closer together. “Advertisers need the data and technology to make their campaigns screen-agnostic as well,” Ackerman said. “Managing reach, frequency, efficiency and impact across screens maximizes the value of each TV ad dollar to reach the right audience at the right time with the right message in order to move consumers through the marketing funnel.” 

As time goes on and the market grows up, programmatic’s targeted viewers will continue to reveal themselves and that will provide opportunity. “With the rise of big data, TV networks, agencies and clients will have even more ways to uncover valuable audiences,” said Beth Rockwood, SVP of Market Resources at Discovery Communications.“This provides the ability to identify the most important segments and translate that into actionable targets,” such as pushing ads directly related to consumers’ explicit needs at particular times. That audience info will also allow it to be mapped and resold through third-party agencies the way it is in the digital world, adds Assembly’s Smith.

For now, however, industry associations are attempting to assign parameters to programmatic’s usage and broadcasters are experimenting with it in the hopes of it becoming a larger slice of the revenue pie. “Our members expect that the industry will begin to coalesce around business rules and guidelines in the next year and trials will expand to more commercial implementations,” says Anne Schelle, managing director of Pearl, a partnership of broadcast companies such as the E.W. Scripps Company, Gannett, and Hearst Television, among others, formed in 2010 to develop next-generation digital media. “We are really just into the first inning here.”

Roberta Caploe: Editorial Director @robertacaploe
Diane K Schwartz: Senior Vice President, Media Communications Group 

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