Automated Advertising: Get With The Program

When he’s speaking with members of the advertising community, Vertere Group’s Tim Hanlon often describes his background as coming from “the medium formerly known as television.” If you have read TVNewsCheck’s latest issue of Executive Outlook that discusses the future of spot advertising, you will understand why a growing number of ad sales executives might want to think about describing themselves in the same way.

Hanlon, whose firm helps organizations benefit from the rapidly changing technological advances in marketing, media and consumer communications, was one of the experts interviewed by Executive Outlook about the growing importance of automated — aka “programmatic” — advertising to spot TV sales.

As Executive Outlook’s report observes, a major concern among TV ad sales departments about programmatic is that it will be associated with real-time bidding or auction platforms that are commonplace in the online world and “tend to commodify advertising and drive down prices.”

But as experts like Hanlon point out, it’s actually much more than that. Programmatic buying is designed to meet the needs of both buyers and sellers in arriving at an agreed upon price for a TV spot that both assures the station receives optimal payment for the spot and the media buyer will achieve results that justify that investment.

Because that sounds like the same outcome for traditional spot sales, programmatic can be viewed as a threat to the role played by local AEs. But rather than thinking about how it may threaten job security, you could adopt Hanlon’s reminder that representing the “medium formerly known as television” illustrates selling spot TV isn’t going away.

Rather, like the medium itself, it is changing into something new and relevant to today’s media buyers. Here are a few of the reasons to look beyond the threatening aspects of programmatic to get a better glimpse of the opportunities it can yield:

Automated Programs Don’t Drive Down Prices

Every time we book a flight with an airline we are reminded that it’s not an automated selling system that determines how much we pay for a ticket. Instead, it’s the “load management” data that the airline programs into that system to determine the optimal price it should charge for a particular seat on that flight.

You can find a great example on how programmatic buying can actually increase the value of TV’s most expensive spot — a Super Bowl ad avail — in a recent posting by Lost Remote’s Adam Flomenbaum entitled Programmatic Ad Buying: Coming to a TV Near You. In the article, Flomenbaum outlines a scenario in which an advertiser pays an $8 million winning bid for a fourth quarter time slot that had been auctioned at the end of the third quarter.

The piece goes on to show this scenario is not that far-fetched when you consider how networks such as ESPN are already using programmatic selling to optimize the value of their spot advertising.

It’s A ‘Choose Or Lose’ Proposition: The Market Has Already Decided

It is becoming increasingly clear that programmatic is not a choice but a necessity for anyone selling spot TV in the not-too-distant future. As the Executive Outlook report notes, advertisers are already scaling back on their spot buys because they lack the efficiency and data advertisers expect from a media provider.

The report also explains that broadcasters’ interest in automation comes from concern that spot is losing business, particularly to network and digital, because of the difficulty of buying it. “You can execute a network buy with a couple of people. To execute that same money for spot, you might need 20 or 30 or 40 people,” said one of the broadcast sales executives interviewed for the story.

To give you an idea of the kind of dollars we are talking about, IPG — and by extension its Magna Global unit — has a mandate to transact 50% of its buys through automated systems by 2015 and told Executive Outlook it’s already nearing that milestone.

In addition, Procter & Gamble, which used to place roughly 16% of its business in local spot television has cut that down to less than 1%, according to what Jim Beloyianis, a media consultant and former president of the rep firm Katz Television Group, told Executive Outlook.

If We Don’t Lead The Way, Someone Else Will Choose The Path We Follow

Executive Outlook’s report points out the risk for station groups that don’t engage in developing automated platforms: media buying agencies could configure them in ways that may not be beneficial to broadcasters.

That’s one of the reasons Gannett Broadcasting President Dave Lougee has been urging the industry to adopt the automated buying and selling of spot TV. “Let’s embrace automation and take ownership of making smart business rules around it for all involved,” he told the attendees at last fall’s TVB Forward conference. As another broadcast sales executive observed: “Stations don’t want the oil to control the pipeline. They want the pipeline to be flexible.”

Collaboration With The Ad Community Is Critical

While there are clear advantages to being the ones who build that pipeline, it is also important to remember the suppliers of that oil — the ad community in this case — have other options for delivering their payload. What marketers care the most about is not only that their “oil” reaches the intended destination, but that it also achieves the anticipated results.

Vertere’s Hanlon puts this in perspective with his observation that today’s automated services for spot are primarily focused on the selling process, while advertisers need platforms that can overlay the data needed for determining a spot’s value and performance. To accomplish that, marketers will want to have data they collected themselves or from third-party sources that is far more granular than traditional Nielsen demos.

Kevin Gallagher, EVP/director of local markets at Starcom MediaVest Group, agreed with Hanlon on the importance of getting the right kind of data. When speaking to Executive Outlook Gallagher said: “I don’t think it’s the automation that continues to bring the dollars to spot TV. I think it’s being able to use data and do behavioral targeting like we do in other media.”

Broadcasters are already aware of this requirement and working to address it. Shereta Williams, president of Videa, a Cox Media Group venture involving three buying agencies and five broadcast groups noted to Executive Outlook: “We’re all about adding additional data. The key is to make sure the inventory is priced correctly given that we both understand [what target audience is] being sold.”

We Need To Take The Long View

The challenges from programmatic are yet another reminder that media businesses are influenced by “disruptors” that often lie beyond our control. Given the impact this particular disruptor is having on a spot sales at the network and local levels, MFM has asked Tim Hanlon to address the topic at next week’s CFO Summit in Fort Lauderdale, Fla. More information on this annual MFM event for CFOs and other senior financial management leaders in the industry may be found on our website.

As with any disruptor, programmatic advertising is going to change the business of media. While it will change some of the ways AEs perform their responsibilities, it is unlikely to change their ultimate importance to the ad sales process. Why else would emerging media competition be so aggressively seeking to lure them away?

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.