Automated Spot Buying Looming On Horizon

It may no longer be a matter of if automated buying and selling services will move into the spot TV realm, but how soon, and to what extent.

Even as broadcasters express major reservations about automated buying, at least two companies, IPG and Visible World, say they expect to light up automated platforms and begin making spot buys with them by the end of this year.

Automated buying of spot is likely to be fairly common “within the next five years, and probably within the next two or three years,” says Jack Myers, chairman of the research firm MyersBizNet.

And it will be a positive development for broadcasters, he adds. “This will ultimately help create increased value for premium [spot] inventory, not less,” Myers says. He believes that automation won’t “prevent demand from being extracted from the product.”

Automated, or programmatic, systems allow agencies to purchase advertising directly online, either eliminating sales people or limiting their role. In some instances, the systems involve an auction with buyers bidding for time.

Such systems are commonplace in digital media, but they had far less success in the spot market. Google TV Ads may have been the highest profile TV effort — and the biggest bust. It shut its digital doors at the end of 2012.

A few platforms like bid4airtime.com persist at selling so-called remnant TV time, but they have had minimal impact on the business.

The renewed interest in automatic buying is coming mostly from the buy side, media agencies weary of the back-and-forth with broadcast sales people and their reps that adds time and expense to the process.

IPG is leading the charge. The agency holding company wants to make half of its buys via programmatic platforms across all media by the end of the next year, says Janice Finkel-Greene, EVP of IPG’s Magna Buying Analytics.

To that end, IPG formed Magna Consortium and has been recruiting like-minded media companies. IPG already has one broadcaster on board, Tribune, and is talking with others. IPG hopes to make its first spot buys through the consortium by the end of this year.

The consortium also includes Cablevision Systems, A&E Networks and Clear Channel.

Another major agency holding company, WPP, is also pushing automated buying. Along with Viacom, Time Warner Investments and Comcast Ventures, WPP is a backer of Visible World, whose Audience Express automated buying venture intends to move beyond cable TV and online and into spot by the end of the year.

“We don’t support real-time bidding or auctions for TV inventory, because TV is a plan-based medium,” says Walt Horstman, general manager of Audience Express. The goal is to raise rates on spot avails that are undervalued and bring in additional buyers.

WPP’s new Modi Media unit will focus on interactive and addressable TV advertising, but will also involve automated TV buying. That’s according to Brian Gleason, managing director of WPP’s Xaxis North America, which handles programmatic buys in other media. Modi’s president, Michael Bologna, was not available for comment.

WideOrbit, the dominant supplier of traffic and billing software to broadcasting, has been working on an automated system practically since its founding in 1999, says President Eric Mathewson. But because of the complexities, he says, he doesn’t know exactly when it’s going to launch.

Among the major broadcasters, Tribune stands alone as a proponent of automated buying.

“I think some level of programmatic or digital transaction is inevitable. It’s our view that we would rather strategically participate in that process than wait for it to participate at us,” says Larry Wert, president of Tribune Broadcasting, which has joined the Magna Consortium.

Some of the concern of other broadcasters is unwarranted, he says. Human engagement in the sales process will be needed “for the foreseeable future.”

“I understand the concerns about potential commoditization, but I don’t think that’s a reason to not have programmatic transactions be part of your model. The owner of the inventory can decide what, if any, inventory they want to put in the market in that process. And they can decide their own pricing,” Wert says.

Wert says he believes Tribune can increase revenue through programmatic selling because “price is a reflection of supply and demand. If you increase demand because you’ve tapped into bigger pools of prospective customers, that can influence price in a positive way.”

Other station sales executives are biding their time, fearing that automated buying will devalue spot inventory.

“We’re certainly in favor of exploring anything that makes local broadcast easier, more affordable, and less labor-intensive to negotiate and buy,” says Wayne Freedman, VP of sales at Raycom Media.

“And there’s certainly an opportunity to offer non-premium inventory. But we do have a real concern about any further commoditization of our business.”

Valari Staab, president of the NBC Owned Television Stations, expresses a similar view: “The closer you can make [inventory] a commodity the better it works for automated systems. And obviously the last thing we want is our viewing to be commoditized.”

Leo MacCourtney, president-CEO of Katz Television, says he doesn’t see a rush to automated buying. “I would be very surprised if the stations would ever allow their premium inventory to be sold in any kind of auction-bid basis.”

Val Napolitano, president-CEO of Petry Television, says he believes automated platforms may work in daytime because the pricing is fairly stable. However, he adds, “I don’t believe primetime and news, for example, will ever go down the road of automated buying. In national, over 50% of volume comes from just those two dayparts.”

“What doesn’t strike a rational chord with me is that you would eliminate the personal relationship and dedication to an individual buy [afforded by sales people],” adds Tim Busch, executive vice president and COO of Nexstar Broadcasting. “Our inventory at stations is constantly changing, and to transact them electronically would be very difficult.”

WideOrbit’s Mathewson also believes there will always be a role for salespeople. “There are some elements of the negotiation that we believe can be automated and others that can’t. Someone needs to make a decision about what the right price of inventory should be for a specific client, and they need to be given tools to aid them in that decision.”

Mathewson explains that a station’s unit in primetime on a Thursday night could command a price from a movie studio that’s as much as five times more than the station would get from a soap detergent manufacturer. That’s because the detergent ad can run any evening, but the studio needs to lure consumers into theater seats that coming weekend.

“In television, different advertisers pay different prices for the exact same inventory, and that system has worked for a long time, and it works well,” he says.

Finkel-Greene agrees that some deals need the personal touch, especially those involving major sports and special events.

But in many cases, it “may not be the best use of anybody’s time to have a sit-down, face-to-face negotiation,” she says. “In those cases it’s best to optimize the available inventory to reach the goal most efficiently, so there’re sufficient funds left over for the higher-priced assets that are being negotiated.”

Finkel-Greene says it’s unclear whether IPG’s platform will ever be entirely automated. “We want to make smarter selections in less time. So it’s computer-enhanced buying, but there’s still oversight.”

Automated buying may bring another change — buying on impressions rather than ratings, Finkel-Greene says. “With fragmentation, many quarter hours don’t achieve a minimum rating point or are so unstable no one’s willing to bet on them. If we move to impressions, at least we get a better sense of what each quarter is worth.”

It would also allow agencies to use the same currency they use for online purchases, she says.

This is Part II of a four-part Special Report. Read all the stories here.