Collins | Automation & AI: The Future Of Advertising
“Automated and impressions-based selling could reverse the long downward trend in national spot advertising.” This is according to TVNewsCheck’s Harry Jessell, based on interviews with senior management from Nexstar, Gray and Meredith.
Frankly, those experts were much more upbeat about the prospects for artificial intelligence (AI) and automation in advertising than PremiumMedia 360’s Joan FitzGerald. FitzGerald penned an article on the subject for the September/October issue of MFM’s member magazine, The Financial Manager (TFM).
Like the three gentlemen Jessell interviewed, FitzGerald points to manual processes and outdated back-office technology as the primary reasons that national spot buys are difficult to execute and have a tendency to underperform. Using the example of what is expected to be a dramatic increase in 2020 political advertising spending — Kantar projects a 34% increase from 2016 levels to $6 billion — she explains that spending that $6 billion isn’t a straightforward process.
Political agencies know less than 100% of the intended advertising budget is actually spent during a campaign; “hundreds of millions of dollars could be left on the table.” Exacerbating the situation is the knowledge that some portion of the advertising that actually runs will not meet the agency’s business rules, which will mean credits for advertising dollars not invested as planned.
She goes on to point out that ad client categories, including telecommunications, have been in a low-growth to flat mode on average in recent years. And, while some marketers that had invested in digital solutions are now dedicating more of their budgets to television, it’s undeniable that digital’s much easier buying process remains strong competition to television.
For media companies using legacy workflow and software systems, FitzGerald says the challenge in implementing the new solutions generally boils down to two areas, technology and automation priorities and the associated costs.
Cost Of New Technologies
As I wrote in this column in March, media companies know they need to invest in new technologies including ATSC 3.0, automation, and expanded digital advertising. ATSC 3.0 offers significant advantages for television advertising, enabling broadcasters to more directly measure audiences and releasing them from reliance on third-party measurements.
NextGen TV will also enable advanced advertising targeting through digital ad insertion. In the piece, I also shared that advertising revenues could increase to as much as 70% of broadcast television revenues with the advent of ATSC 3.0, and FitzGerald concurs.
She also says there is concern that automation will introduce new fees like those being assessed on digital advertising buys. Those transactions include a significant per-transaction “tax” paid to ad tech companies. In 2017, the investment bank Luma Partners estimated the fee to be as high as 40%. FitzGerald believes that television media companies don’t want to repeat the mistakes of their digital counterparts.
However, when Jessell asked the television group executives about this concern, they seemed to dismiss it. Instead, they talked about increasing the size of the pie, improving efficiencies, and the importance of “being able to control and protect our value in that ecosystem.”
The promise of AI and automation FitzGerald says, is that when executed properly, the technologies can ensure that 100% of advertising dollars are invested. This means media sellers can reclaim that lost revenue.
Specifically, she says these technologies have the potential to eliminate three problems:
- Invoice credits — typically the result of ads that either didn’t run or ran incorrectly.
- Make goods — additional ad placements for spots that either were preempted or didn’t achieve guaranteed audience levels.
- Write-offs — for invoices or portions of invoices that will not be paid because they buyer disputes the results.
Additionally, the TV Interface Practices (TIP) Initiative, an industry work group of local television broadcasters, is focused on promoting open interfaces to streamline advertising transactions for local TV broadcasters and their media agency partners. Further, the group works to accelerate the automation of spot television and to streamline transactions and reduce the reconciliation burdens on buyers and sellers.
Consortium members include E.W. Scripps, Fox Television Stations, Graham Media Group, Gray Television, Hearst Television, NBC Owned Television Stations, Nexstar Media Group, Sinclair Broadcast Group and Tegna. Several companies currently provide automation and AI solutions with the goal of helping media companies transform ad buying and selling processes so that tasks are handled in ways that are accurate, accelerated, and inflight.
Good For Both Buyers And Sellers
FitzGerald views the deployment of AI and automation from two perspectives. She reports: “Agencies that manage fast-moving accounts also should be motivated to bring AI and automation into their backend systems to execute transactions more quickly and with more accuracy, and without spending more money to accomplish this.”
Karine McMaster, vice president, director of advanced local media at Dentsu Aegis, told FitzGerald: “Our goal is to improve the workflow process to create more efficiency and effectiveness for our clients. Our clients want the right outcomes for their brands, and they need results right away. We need to be able to transact faster and more accurately without increasing the cost of doing business.”
Unfortunately, that will only solve part of the problem. The other piece involves invoice reconciliation. As an example of how difficult and time-consuming this can be, FitzGerald quoted an executive from a political ad agency who told her he was still doing invoice reconciliations nine months after the close of the 2018 election season. This is time-consuming and labor-intensive. FitzGerald asserts, “Automation and AI find errors before they become problems in the invoice, which is a big win for buyers and sellers alike.”
Agencies also want to get data more quickly to make better client decisions. Kyle Roberts, president of Smart Media Group, told FitzGerald: “We want to buy media with more precision to deliver a better response to advertising for our advertisers.” In this way, he says, all client dollars can be invested.
On the station side, sources estimate that invoice reconciliation loses an amount equal to between 1% and 6% of annual revenue. FitzGerald reports that Kantar values local TV ad revenues at $18.2 billion annually. Given that, the estimated shortfall from discrepancies is a whopping $182 million to $1.2 billion each year.
Nexstar’s Perry Sook told Jessell that the process of buying local advertising is very “manual intensive.” FitzGerald unpacks that by explaining that there are a “staggering” number of manual processes in both agencies and television stations. These include having local ad sales manually enter “crucial ad-buying data and business-rules information from agency buyers.” Sales personnel are also responsible for personally emailing performance reports to their agency contacts. Worse yet, when something doesn’t go as planned, the resolution requires multiple phone and/or email contacts.
FitzGerald views the current situation as “lose-lose-lose.” She says: “Advertisers expect that the dollars they allocate to advertising will be invested. When that doesn’t happen, they don’t meet their communication goals with consumers. When buyers invest less than 100% of the advertiser’s money, they don’t meet client-service-delivery goals for the advertiser and receive a lower commission. When sellers place less advertising, their revenue is reduced.” It’s a vicious circle indeed.
FitzGerald’s piece, entitled “The Possible Dream,” is available in its entirety online in the September/October issue of TFM, which can be accessed from the MFM website for a couple more weeks. It includes a sidebar called, “Shouldering the Load” which provides a primer on the three different ways companies are working to use automation or AI to help media buyers and sellers.
Harry Jessell mused that automation was a big topic when TVNewsCheck launched 13 years ago. He then asked Gray Television’s Pat LaPlatney why it seems to be taking so long to be implemented. LaPlatney replied that there is now energy and momentum behind the initiative; that it will happen. “It’s not going to take another 13 years. Let’s put it that way.”
Because of their potential to change not only the way advertising is bought and sold, but the very way business is conducted and recorded in media companies, MFM is paying close attention to the discussions in this area. Not only will AI and automation be the subject of future articles, we also expect to include this in the discussions during our 2020 CFO Summit (March 5-6 in Fort Lauderdale, Fla.) and Media Finance Focus 2020 (May 18-20 in Los Angeles).
As always, if you have thoughts about this or other topics MFM is, or should be, covering please let me know.
Mary M. Collins is president and CEO of the Media Financial Management Association and its BCCA subsidiary, the media industry’s credit association. She can be reached at [email protected] and via the association’s LinkedIn, Twitter or Facebook sites.