Why Networks Don't Prioritize Programmatic as They Move Into Streaming

Streaming is the word for this year’s upfront discussions, but big networks aren’t yet opening up that highly valuable inventory to programmatic buying. The growth of streaming, accelerated by the pandemic, is pushing marketers to move some of their TV budgets out of linear and into connected TV. Since CTV is a digital medium, ad-tech companies are vying for a slice of that ad spend, but so far, networks are opting to sell their ads by hand and not make their inventory entirely available programmatically. A report from Jounce Media found that virtual multichannel video programming distributor (vMPVD) apps, like Sling and Philo, make up 43% of programmatic CTV auction. Apps that traditional networks may own—including free-ad supported apps like Tubi and Xumo or subscription-first apps like Paramount+ and Discovery+—make up less than 19% of programmatic CTV auctions. And within the vMVPD apps, only 13.7% of programmatic auctions are initiated by big traditional networks (the likes of NBCUniversal, ViacomCBS, and WarnerMedia), suggesting that, even in a new medium, TV’s old guard still values upfront commitments and reservations over the real-time nature of programmatic trading. “The decision by content owners to embrace or reject programmatic auctions is the difference between a $30 billion advertising opportunity and a $150 billion advertising opportunity,” reads the report. What’s holding networks back? Part of this dynamic is basic supply and demand. CTV inventory is relatively scarce, and marketers are clamoring for it, meaning much of the inventory has been presold by the time it’s available in a demand-side platform. Open auctions can introduce competition and increase prices, but the cost of a CTV ad is already high, so any additional revenue may not be worth the added risk of programmatic, like poor ad quality, ad delivery latency and even fraud. One network executive said a downside to open auctions is the inability to control the ad experience, since tools aren’t yet in place to vet creatives before an ad is served. Private marketplaces—a type of programmatic deal where a media owner invites only a handful of known buyers—could solve that, but they target very specific audience segments that are sometimes too small. When a segment is too granular and audiences aren’t there, it’s hard to know how much volume a PMP will generate, the executive said. Another media exec told Adweek that ad tech in CTV is still a bit too immature. Unlike display advertising where there’s only a single ad to bid on, ad tech in CTV has to manage entire ad pods that can be up to three minutes long, requiring technology to stitch together and sequence a handful of ads while also managing for factors like competitive separation. There's a tremendous amount of revenue on the line...but with that comes some consideration around risk.Jason DeMarco, vp of OTT, Index Exchange All of this can make networks, which are used to having tight control of their inventory in the $70 billion traditional linear TV space, hesitant to adopt new technologies and change how they sell their ads. “There's a tremendous amount of revenue on the line for programmers and publishers, and a tremendous amount of opportunity for marketers, but with that opportunity comes some consideration around risk,” said Jason DeMarco, vp of OTT at Index Exchange, a supply-side platform. Networks don't entirely dismiss programmatic, especially since many are building their own internal tools to manage both direct and programmatic deal. Networks also push programmatic guaranteed deals, where ad tech acts as the pipes that facilitate direct buys. CTV ad spend in the U.S. is expected to total $11.36 billion in 2021 and surpass $14 billion the following year, according to eMarketer. Despite networks holding inventory close to their chest, overall programmatic CTV ad spend will also grow as more dollars flow into the space, with eMarketer projecting it to reach $6.7 billion this year. Randi Leonard, director of advanced video investment at Haworth Marketing and Media, said the majority of the CTV buys her agency oversees are done directly, partly to take advantage of pricing incentives from networks. Programmatic buying is useful when layering on additional targeting or trying to extend the reach of a campaign, she said. Overall, there are so many different ways of buying CTV inventory, and different stakeholders often have access to the same supply. Marketers can buy from content owners, distributors, operating systems and DSPs, creating a crowded landscape similar to when ad tech first came to desktop advertising. “CTV right now is very similar to when digital first started,” said Leonard. “There's a million partners out there; everyone's trying to get a piece of the same content the same inventory. I don't foresee that continuing.”