Facing rising content costs, operational expenses, and competition for consumer attention, multi-channel video program distributors (MVPDs) have begun searching for new ways to monetize stream viewership with the goal of boosting the business case for video. Recently, programmatic TV (PTV) advertising has emerged as a key area of interest for operators that believe it can help them generate more revenue from the streams they already deliver. While it is still in the early stages of growth, the PTV advertising market is expected to flourish in the coming years, eventually becoming the dominant way in which video ads are sold and placed. In this article we will discuss PTV advertising and the potential opportunity it presents for operators that move quickly to embrace the new technology.
The sale of video advertisements has always been a key contributor to linear TV revenues. While the overall market for video ads remains sizeable at around $140 billion, to the dismay of both broadcasters and MVPDs, traditional TV’s share of the total advertising market has been steadily declining for years. According to WARC, a U.K.-based media research company, global TV ad spending on linear TV accounted for 41.9% of global ad spend in 2018, down nearly 8% from a peak share of 50% in 2014. This erosion can be attributed to marketer’s shifting their ad spend away from linear TV in favor of online, mobile, and connected TV advertising, which features more flexible targeting parameters, automated transactions, and detailed real-time measurement.
This trend has been particularly troublesome for MVPDs, including cable, satellite, and telco providers who offer paid subscription-based television services. It varies by region, but in North America these distributors are allowed to sell at least two minutes of advertising for every hour of programming they distribute. MVPD ad inventory has typically been used to insert local advertising, for example political ads and ads for regional businesses whose message is targeted at people within a specific geography. As competition for these ads has increased, distributors have found it difficult to respond, hampered by legacy TV distribution architectures and entrenched ad sales practices. However, things are beginning to change. MVPDs have begun to roll out new IP content delivery architectures and stream personalization technologies that enable them to sell individual ad impressions programmatically through online ad exchanges. Programmatic TV advertising (PTV) promises to boost MVPD revenues by expanding the market of potential advertisers, providing the means to raise CPMs by more precisely targeting TV consumers, and streamlining the ad transaction workflow. It also provides a mechanism for verifying placement of the ads and accurately reporting revenues.
PTV is an entirely new way of selling TV ad avail inventories - inventories of ad placement opportunities. Programmatic advertising requires the ad avail inventory owner, in this case MVPDs, to support an automated ad sales workflow. This includes the ability to sell, place, and measure individual ad impressions in real-time. Ad transactions are conducted through ad exchanges, online marketplaces that auction individual ad avails to advertisers. Through these exchanges, marketers can search for avail inventory to bid on using finely detailed targeting parameters derived from addressable and contextual data. Addressable data includes anonymized consumer profile information, while contextual data provides details about the inventory and viewing session such as channel, program, device type, and geography information, as well as other relevant targeting factors. Once an ad avail is presented, ad exchanges run an auction process, accepting bids for ad space and awarding it to the highest bidder. When the auction closes, ad content is immediately handed off to the avail inventory owner for insertion. The inventory owner must successfully insert the ad and return performance metrics to the ad exchange to verify placement and complete the transaction cycle.
The advantages of PTV advertising include:PTV advertising is still a relatively small proportion of the overall TV ad market, but it is projected to grow fast. According to e-marketer, $2.77 billion will be spent in 2019 on PTV ads and this figure will nearly double in 2020. In fact, since 2016, the market for PTV advertising has risen a whopping 433%. It is still early days, but there are several reasons to believe that market growth will continue, namely:
There are several steps involved in making Programmatic TV advertising work.
Building a PTV solution from scratch can be difficult given the integration complexities and multiple parties involved. Interfacing multiple ad exchanges into the foundational network to enable a reliable, low-latency workflow requires specialized expertise and a strong knowledge of the underlying network. Fortunately, MVPDs can now buy complete end-to-end PTV advertising solutions that make it easier to get started. All-in-one PTV solutions manage the entire PTV advertising workflow and include the services required to get everything up and running. Working with the right supplier, MVPDs can start taking advantage of rapid growth in the PTV advertising market, improve the monetization of live services, and generate more value from every stream they deliver.
