Today's column is written by Jeff Green, founder and CEO of The Trade Desk.
Up until recently, it was unheard of for advertisers to put their Super Bowl ads online ahead of the big game. Today, it’s a smart strategy, with more and more leading with it.
That’s because TV and the Internet are merging in every conceivable way, including the way inventory is bought and sold. Right now, most cable companies, MSOs, OEMs and content owners are creating programmatic strategies. There are many vice presidents of programmatic in shops that were all about linear in times past.
Some argue this is only the beginning of a very long, slow transition. But in a few years, even television’s most highly coveted inventory, Super Bowl time, will be bought and sold programmatically. The benefits of automated purchasing – chief among them, efficiency and targeting – will be too great for advertisers to ignore.
For markets to work, we need both buyers and sellers. Buyers clearly see value in programmatic, as evidenced by its growing use in digital. Consumers will see better relevance and personalization.
But what's in it for the TV companies? This one’s easy: more money.
There seem to be two major teams – no, not the Seahawks or Patriots – when it comes to how the evolution of TV will transpire.
There are those who say it will take forever. Very often, these are the people who’ve been living in TV for a while.
And there are those who think it will take off quickly. These are usually people who’ve spent at least a few years in programmatic.
They’re both right.
Netflix CEO Reed Hasting says that broadcast will be over by 2030. If he’s right, that’s longer than RTB has been alive.
But streaming was up 60% and linear was down 4% in 2014. Consumers are canceling cable. HBO and CBS are going direct-to-consumer, perhaps leading a trend for where content is heading. Streaming is growing because consumers demand it, which is not what led the growth of RTB in display advertising.
There is room for both camps to be right, even if we just saw 5% of TV ads move to programmatic and addressable in the next 18 months. This will be led by consumers’ demand for streaming content. That could make programmatic TV, combined with web video, bigger than all of display.
A More Granular Market Commands A Premium
TV networks sell Super Bowl inventory based on ratings. Fox, which broadcast last year's game, reached an audience of 111.5 million people. That's an impressive number, but for some products it also reflects some amount of waste for both buyer and seller because embedded in the larger Super Bowl audience is the much smaller subset that an advertiser actually wants to reach.
An automotive advertiser, for example, doesn't want to reach every viewer. They want to reach only those potential buyers that are in the market for a new car. And yet automotive advertisers spent millions of dollars last year carpet-bombing consumers during the Super Bowl. They paid to reach 111.5 million people, but they knew that millions of those impressions would be wasted in at least two ways. There are the millions of viewers who simply aren’t the target audience. And there is also another segment of waste inside the target demographic.
Simply put, demographic media buys are not the same as data-driven buys. The former is an educated guess at who might be in the market for a new car while the latter is an informed analysis of who is in a market for a new car.
A Premium Approach Yields Premium Results
Recently, ESPN announced that it would soon begin selling some inventory programmatically for SportsCenter, the network’s flagship show. Explaining the decision, Eric Johnson, ESPN’s executive vice president of global multimedia sales, said he believes ESPN’s approach will keep ad prices at a premium, particularly on days with heavy sports interest.
ESPN knows that there will be days when the SportsCenter audience surges. That’s the beauty of live sports, which is always a popular category, but one that can also spike dramatically on a moment’s notice. ESPN also understands that if it pre-sells that inventory, it won’t reap the benefits from having a hot media property.
Of course, networks that broadcast the Super Bowl are in the same boat. Super Bowl viewership continues to break records year after year. Network sales teams know that, and each year they work to extract more money based on the previous year’s performance. But wouldn’t it be better to realize that value when it’s created? The Super Bowl is the logical place to replace upfront discounts with auctions designed to bring in premium CPMs because we know demand will be high and, quite likely, higher than expected.
Rubber, Meet Road
ESPN is doing it right. Linear TV will be here for a long time, but the benefits of streaming and addressable TV are being realized now – even in the Super Bowl. This Super Bowl marks a new era for streaming video and programmatic advertising.
It doesn’t take many TV percentage points to move the programmatic needle. Display was a dress rehearsal. And this is happening fast, in part because consumers and advertisers together are moving the market – something that never happened in web advertising.
Although content will always be king, it takes a market to discover the real price of his ransom.