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Programmatic TV advertising is still in its infancy
due to limited buyer and seller adoption and lack
of standardization of technology and infrastructure.
Though it accounts for less than 1% of all TV ad
spending, some predict it could be a multibillion-dollar industry within 12 to 24 months as both
buyers and sellers use it to better understand
their audiences, according to a new eMarketer report, “Programmatic TV Advertising: Small Investment Today, Big Opportunity Tomorrow.”
Today, the select few who are using programmatic
and its audience insights to buy TV ads are doing so in
one of two ways. The first and most common use is
as an optimization tool to inform index-based buying
strategies on linear TV advertising. The second use is as
an audience segmentation and targeting tool designed
to reach individuals at the household level, thanks to the
capabilities of addressable TV.
Addressable TV is a logical starting point for bringing programmatic buying to TV, considering its pre-existing capabilities and infrastructure for targeting individuals down to the individual household level.
There are two main sources of addressable TV ads today. The first is connected TVs and other IP-enabled devices—offering addressability for digital video advertising delivered on televisions. The second source of pure TV advertising is set-top boxes from satellite and cable companies that offer addressable advertising for either on-demand or linear programming.
Though the capabilities exist, it’s important to note that, presently, the addressable reach of these cable and satellite providers remains small. Dave Morgan, CEO and founder of Simulmedia, noted in a July 2014 blog post that addressable TVs are present between just 10 million and 12 million households today, with the potential to reside in 40 million by 2016. Simulmedia’s estimate is based on a fairly strict definition of addressable TV, so some other estimates come in higher.
Whatever the reach of addressable TV, it remains a very small fraction of the overall TV market. Furthermore, buyers don’t have ready access to the full addressable market, however large it is. Programmatic infrastructure is still in its early stages and lacks standardization, making it difficult for buyers to align their efforts across inventory sources.
eMarketer defines programmatic TV advertising as an automated, technology-driven method of buying and selling linear TV ads, both broadcast and cable, or timeshifted TV recorded on a DVR.
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