As TV And Digital Converge, Beware Of The Third Advertising Stack

lornebrownupdated"On TV And Video" is a column exploring opportunities and challenges in programmatic TV and video.

Today’s column is written by Lorne Brown, CEO at Operative.

You’ve heard it before: Digital and TV are converging. We may talk about it, but many haven’t stopped to examine the hard technical and operational challenges that media companies must undertake to profit in a converged market. 

Right now, most TV media companies have at least two significant advertising stacks: one stack for linear TV and one for digital advertising.

On the linear side, publishers have an order management system, at least one ad delivery system and several reporting systems. For digital advertising, there is a different order management system, ad servers for display, video and mobile and a variety of data, yield management and reporting tools. Things are so complex that it’s possible for publishers to have five, 10 or even 20 technologies in each stack supporting each channel.

These tech stacks have taken years to assemble and integrate, and now the rug is about to be pulled out from under all of it. As TV and digital merge, these tech stacks must also merge – fast. The problem is that media companies are notorious for doing too little too late when it comes to technological innovation. The biggest threat to media companies right now is the rise of a third advertising stack that sits between TV and digital to fill the void. 

Now is the time when media companies are most vulnerable to the siren song of aggregators and other middlemen in the digital video ecosystem. Many vendors offer publishers the chance to get in early on addressable and programmatic TV and are similar to ad networks and sell-side platforms before them. They offer services layered on top of technology, promising to do the heavy lifting for the publisher and offering them a check at the end of each month.

Relationships with these companies might allow publishers to test new digital video offerings early, but they also allow a third ecosystem to develop that takes a tax before ad budgets reach publishers. And by working with aggregators, media companies delay the important task of updating their own technology and operations to be relevant in a converged market.

It can be painful to customize or integrate technologies, but TV and digital convergence is not a fad and so the pain is worth dealing with now rather than later. Every company uses a different combination of CRM systems, sales platforms, delivery tools and analytics tools. The last thing companies need is to add new systems to this mix without converging or eliminating others.

The risk isn’t just about a third stack, but many more stacks. There are already about eight different advanced TV channels, including over-the-top and video on demand. If each of these gives rise to a web of opaque middlemen with their own reporting and black-box delivery, it will become impossible to sell a converged offering to advertisers.

Turning to middlemen rather than streamlining technology can also create a ripple effect where there aren’t just more technologies but more processes to deal with as well. Operational process in TV has certainly expanded and fragmented over time, but it’s still nothing compared to the complexity of digital media. As TV becomes more data-driven, the process for selling, delivering, measuring and billing TV will start to resemble digital even more.

There are several pain points that can cause publishers to avoid the heavy lifting. For example, the head of sales may want to use a reseller partner rather than train their sellers on a new technology. This, however, limits the rest of the company’s exposure to an important new channel, slowing its ability to get familiar with it. Also, this limits a publisher’s ability to create compelling offerings for advertisers, which will ultimately handicap its sales team compared to other publishers that did the hard work up front.

Publishers must think of those pain points as important forks in the road and take the right path. One direction is the easy way out – for now – while the other is the long-term road to success. While an internal task force charged with updating and integrating technologies would help everyone in the organization focus on the long-term strategy, working with like-minded partners and industry associations that set workable standards will help the wider marketplace move in the right direction as well.

Follow Operative (@Operative) and AdExchanger (@adexchanger) on Twitter.

 

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