Get On The Programmatic Bandwagon Now

Competition in the video advertising market continues to expand. Digital viewing is growing at a pace of nearly 20% year-over-year. Ad dollars are following these eyeballs. There’s an opportunity for digital media platforms to capitalize on their capabilities and meet the ad community’s demand for automated solutions that simplify media buying and optimize their investments.

The only segment of the video advertising market that is enjoying astronomical growth as well as higher prices involves ads sold using programmatic, or automated, sales tools. Accordant Media’s 3Q 2015 Market Pulse Report found the total volume of programmatic buys expanded by 53% over a year’s time while the average CPM (cost-per-thousand) rose by 6%.

James J. Ackerman, executive chairman of Broadway Systems, a provider of advertising sales and traffic software solutions for TV stations and other media properties which is being acquired by Sintec, sums it up this way: “The traditional sales method, involving a great deal of human interaction, will be replaced by systems that make better use of technology and give advertisers a much more attractive return on their investments.”

Ackerman addressed two of the essential components of digital media sales — programmatic advertising and dynamic ad insertion (DAI) — in an article appearing in the current issue of MFM’s TFM – The Financial Manager magazine. As he notes in the article, these solutions represent a marked departure from the current TV sales process, where “advertising sales teams are currently in a constant state of making proposals and negotiating deals with their clients; manually booking orders and copy instructions; tracking yield and managing liability; pulling reports — and more.”

In contrast to the traditional approach toward sales, Ackerman says: “The changes that are in the process of emerging are very much informed by the sales process in the digital realm, where advertising is bought and sold largely on a programmatic, or automated, basis — that is to say with little human involvement.”

Programmatic ‘Magic’

Ackerman says one way to think about programmatic is by comparing it to an ATM, where you “push a few buttons and you’re done.” In this example, the “buttons” would be used for selecting the budget you have to spend and the number of impressions you want to generate within a target customer market.

This data is entered into a buying software system that is connected to a sales (selling) system, which pulls from ad inventory that’s available on hundreds, if not thousands, of participating media outlets. The selling system matches available impressions with the advertiser’s target and “determines the most optimized way to fulfill the buyer’s request.”

While admittedly over-simplifying the process, it does describe how media planners and buyers are purchasing most of their digital media today. The more important point is its potential impact on station revenues. Research company eMarketer says it expects more than 80% of all media will be purchased via programmatic solutions within the next two years.

Making The Transition

As you would expect, TV’s ability to compete for those digital dollars is very important to the members of MFM and our BCCA subsidiary, the media industry’s credit association. Ackerman numbered among the presenters who discussed media sales trends at Media Finance Focus 2015. It’s also one of topics slated for MFM’s 2016 CFO Summit, which will feature a presentation on programmatic advertising by Forrester Group senior analyst Susan Bidel.

Bidel, who has written recent research reports on such topics as data management, and the role of viewability in measuring advertising effectiveness, will be joined by other experts who will address the growing importance of digital media sales to a station’s bottom line.

They include our keynoters Wissam Kairouz, managing director at Morgan Stanley & Co.’s Leveraged & Acquisition Finance Group, and Harlan J. Wakoff, managing director of the firm’s Media and Communications Group. We have also asked Gordon Borrell, CEO of Borrell Associates, to provide an update on the outlook for local ad sales and to talk about what he sees as the local media company of the future.

Relationships Remain Important

Adopting programmatic solutions doesn’t mean that stations should abandon processes that are successful in selling their most valuable inventory. My own experience in sales reinforces the importance of personal relationships. This is an area where stations and other incumbent media have a major advantage.

Instead, consider making some of the station’s inventory available via programmatic. Think of it as another tool for establishing relationships with new advertisers. Local advertisers who are only buying on a station’s online and mobile platforms should be good candidates for buying the parts of on-air inventory that could be sold through automated solutions.

In addition, programmatic may be the best way to establish relationships with the next generation of media buyers. If job descriptions and my anecdotal experience are any indication, they are far more likely to rely on computer software than in-person meetings when making their purchasing decisions.

DAI — Dynamic Ad Insertion

Automation doesn’t stop with the process of buying media. Ackerman’s article goes on to discuss dynamic ad insertion (DAI), which uses set-top box data to match viewers with the consumer attributes identified in a media buy. Because MVPDs and online programming distributors use automated solutions for uploading VOD programs and advertising content as separate files, stations can collaborate with their local cable system on these TV Everywhere opportunities for monetizing the station’s original content.

Today, networks use DAI to replace ads on TV shows appearing in VOD libraries after the 3-day or 7-day period that’s secured by an initial media buy. Long term, Ackerman predicts “nearly all network advertising will be delivered on a dynamic basis even during live linear TV viewing.” This is the oft-quoted scenario in which you and your next door neighbor are watching the same live program but seeing “completely different ads geared towards the make-up and viewing habits of your respective households.”

Back-Office Integration

Ackerman’s article appears in the November-December edition of TFM, which is available digitally on MFM’s website for a limited time. Broadway Systems is an example of the way businesses that provide back-office support to media providers are incorporating automated solutions into their product lines.

We are taking the same approach with MFM’s BCCA subsidiary. BCCA members require tools that can automate and accelerate the time required to turn-around credit applications from new customers.

Our recently launched Media Whys industry-specific credit report is designed to support that objective. Developed in partnership with Business Credit Reports, the largest independent provider of business and owner credit information, Media Whys provides online access to a credit score based on industry-specific aging along with a score that combines with trade data from Experian or D+B.

At MFM and BCCA, we are always looking for your guidance on the educational programs and services that can help you to meet your station’s revenue challenges. We welcome your thoughts and recommendations on how our organization can support your station in seizing revenue growth opportunities.

Mary M. Collins is president and CEO of the Media Financial Management Association and its BCCA subsidiary. She can be reached at [email protected]. Her column appears in TVNewsCheck every other week. You can read her earlier columns here.