Broadcasters adopting programmatic ad buying to attract millennials
Television broadcasters are beginning to adopt programmatic ad buying to boost their ratings and as a response to changing demographics. Younger audiences are switching from conventional TV to digital video, hence the inclusion of ad buying techniques such as "automated guaranteed" in the ad buying market. With automated guaranteed, ad agencies and publishers enter into a contract where pricing is fixed in advance and a digital inventory agreed in accordance with that. This ad method can lead to greater profits and productive long-term relationships between both parties.

TV broadcasters have long been hesitant when it comes to the adoption of programmatic advertising techniques, often fearing the risk of commoditization. Yet, slowly but surely, buyers report that more digital inventory from broadcasters is available through programmatic in the upfront market.

Such conversations can take place during TV Upfronts in May or from late summer through early fall outside of the conventional upfront presentation, depending on a brand’s spending pattern. Automated guaranteed makes sense for broadcasters because their audiences, especially younger demographics, are watching less traditional TV and more digital video. In response, broadcasters are supplementing the lack of eyeballs on TV with digital video audiences to boost their gross rating points.

This approach, known as “automated guaranteed” in the industry, is negotiated to mirror direct deals and puts the publisher and the agency on commitment to each other: Both inventory volume (on the publisher side) and ad spend (on the agency side) are secured by contract and reserved in the ad server.

“Automated guaranteed deals are great because all the pricing is set in advance, and you can keep deeper relationship with the advertiser,” said an ad strategy executive for a major broadcasting company. “Publishers can usually have higher yields from guaranteed deals than open exchanges and private marketplaces. And there’s a growing demand from agencies.”

For instance, a brand’s agency may decide to allocate 10-20 percent ($2-4 million) of the brand’s digital budget, say, $20 million, to run through the programmatic pipes. If it’s a video deal, a broadcasting company submits a proposal to a brand’s agency that includes CPM rates for both direct digital video and programmatic digital video (and sometimes TV). Once the CPM rates are finalized and the agency agrees to meet the publisher’s minimum spend requirement, say, $2 million, the brand will be able to automate video ads in any formats (pre-roll and mid-roll, for example) on the broadcaster’s digital properties.

Those deals usually run for at least half a year. The brand can opt to spend more on automated guaranteed if it sees positive results, according to agency and ad sales executives who are working on automated guaranteed deals. Display deals are negotiated in the same fashion.

Ad buyers are asking for automated guaranteed because they want to buy audiences across a broadcaster’s inventory and derive greater effectiveness from their TV media investments. In order to do this at scale, national media owners need to make their inventory available programmatically. So advertisers can look at campaign performance across inventory in real time to identify what is working and what is not, and use actual campaign data to inform future campaign decisions, like channel allocation or publisher selection, according to Louisa Wong, chief digital officer for Dentsu Aegis Network and Patrick Rubin, vp and director of advanced TV strategy and investment for its investment arm Amplifi.

Dentsu Aegis Network invests on average 40-50 percent of its overall U.S. programmatic spend in automated guaranteed. “The demand side is urging national media owners to do so,” said Rubin. “Smaller TV media owners that have made little to no investment in data assets are most likely receiving less upfront marketplace investment from advertisers.”

There’s also more platform support for automated guaranteed than before. Previously, if publishers wanted to run programmatic guaranteed deals through their supply-side platforms, they had to pay SSPs higher service fees. Publishers balked and attempted to pass off the additional cost to agencies — they might ask for $28 for a $25 CPM, for instance — and were met with resistance.

But now, agencies can employ various tools on the demand side to lower the cost of automated guaranteed for publishers. For instance, they can use Google DoubleClick Bid Manager, which started supporting direct sales this year. They can also partner with programmatic direct companies like AdSlot and iSocket to connect directly to publishers’ ad servers via server APIs, where all the deals are being done by skipping the entire bidding process.

Ad exchanges like Index Exchange are also starting to explore commercial terms with publishers, where processing a $1 CPM open transaction should bear the same net cost to the publisher as processing, say, a $25 CPM automated guaranteed transaction, according to Zach Rosen, senior director of strategic partnerships for Index Exchange.

But automated guaranteed is still nascent. Many publishers, especially larger traditional ones, are still having trouble keeping pace with innovation, and their sales teams are separated from operations teams that are managing the publisher’s ad server. Such silos lead to slow testing of new programmatic technologies and, perhaps more troublingly, the inability to make good on sales promises, said Trevor Mengel, director of programmatic product for Horizon Media.

An agency source who prefers anonymity further explained the nitty-gritty with a recent upfront deal. At the onset of the campaign, win rates (the percentage of impressions won over impressions bid) were around 70-80 percent. Then just a day later, the win rates dropped to 20 percent, and the buyer thought, “This is clearly no longer a true first-look deal if we’re being beat in the auction.” The publisher denied any changes until the buyer asked for a screenshot of the deal’s priority. Somehow after that, the campaign’s win rates miraculously recovered.

“Resorting to requiring screenshots of deal setup is not the direction we want to head in,” said Mengel. “I’m afraid this will continue until two things happen: The publisher sales team and operations team become more strategically aligned, and the industry adopts a standardized means of verifying priority in the publisher waterfall.”