EVP, Chief Media Operations Officer
There has been a great deal of coverage in recent months about the potential adoption of programmatic ad buying in the national TV space. Currently more prevalent in digital media, programmatic buying is the application of technology to execute media buys in an automated fashion. Often, sophisticated computer platforms introduce targeting and other data to intelligently bid for – and purchase “auction style” in real time – inventory for advertisers, one impression at a time.
Clearly there are technology providers, buyers, and sellers working to automate certain aspects of the National TV buying process in an attempt to replicate the programmatic model employed in digital. Although we certainly seem to be moving in that direction, most industry experts agree that there are still some barriers to widespread, fully functional programmatic TV – especially at the national level. Stakeholders within the industry have formed the Programmatic TV Standards Group to address these issues.
It’s projected that programmatic TV – in this case broadly defined as TV advertising transacted through a technology platform rather than an order letter – will represent 4% of US TV budgets in 2015, or some $2.5 billion.
What About the Other 96%?
What many don’t know, however, is that for the vast majority of National TV activity which is currently being bought the “traditional” way, the buying and stewardship processes are far from automated – even in areas where they clearly could and should be. Given that billions of dollars are currently in the marketplace for the 2015-16 Upfronts (where buyers and sellers agree on pricing and packages for the 2015-2016 TV season) and given that debates surrounding media agency transparency continue to swirl, this matter should be of particular concern to advertisers right now.
Understanding this issue – and the potential severity of it – requires a little background on the traditional National TV supply chain:
- Buyers (in most cases agencies, on behalf of advertisers) provide budgets and request packages of inventory from sellers (networks).
- Sellers offer buyers packages of commercial inventory including proposed pricing and estimated demographic ratings (audience delivery).
- In some cases, buyers review these estimated ratings against their own research and negotiate more realistic ratings, and in others they simply accept the estimates provided by the seller, since they are generally guaranteed.
- Buyers evaluate the implied cost to reach 1,000 members of the target (CPM) based on the proposed cost and estimated ratings, compare those CPMs with other available inventory, and negotiate packages accordingly.
- For the majority of National TV buys (with the exception of some Broadcast Network buys made quarter-to-quarter/Scatter, or in certain other extenuating circumstances), the agreed estimated audience delivery and resulting CPM is guaranteed by the seller to 100%.
- After schedules air, agencies and sellers come to agreement on actual delivery using 3rd party research, and at the end of the purchase/guarantee period, any actual delivery falling short of the 100% guarantee is compensated to the buyer with future “Audience Deficiency Units” (ADU).
Agencies spend considerable resources on electronic “buying platforms” to help automate this process (and to post, reconcile and pay for buys after they air). These computer systems house all of the data associated with each individual commercial unit – network, program, day, date, time, cost, length, rating, creative code, etc. Each commercial occurrence is its own line item.
With these sophisticated buying platforms in place, agencies should be able to manage the above purchase process from end to end in a transparent, automated fashion – with all data points housed in a central electronic repository. But in the vast majority of cases, they simply do not.
A Shockingly Manual Process
Rather than managing these transactions fully in their buying platforms, most agencies use a combination of their platforms, Excel spreadsheets with myriad tabs, PDF documents (or email) with vendor guarantees, and separate performance reporting provided by vendors or 3rd parties.
In many situations, buyer and seller do not agree on the “estimated” audience delivery or rating for the schedule. The seller’s estimated ratings are notoriously optimistic, and many agencies prefer to track buys according to their own estimates, which they consider more realistic. It is the seller’s “estimated” delivery, however, which forms the basis of the delivery guarantee.
Many agencies thus track their own estimates within their electronic buying platform, and then track delivery against the seller’s guarantee manually in a completely separate place (usually a series of Excel spreadsheets). Tracking this activity in multiple separate locations (and in part manually) is clearly not ideal. This limits transparency, forces manual work and reporting, and increases the likelihood of errors and other inconsistencies.
For the actual ratings delivery (the posted delivery, which is what is used to assess performance against the purchase guarantees), again we often see agencies managing multiple sets of data. Most will run their own “post”, in their electronic buying platform. However, in many cases they point to a separate “post” performed using different methodology (provided either by a third party or by the vendor itself) as the actual final arbiter of delivery. Again, agencies often manage comparisons of these “final” actual delivery figures back to guarantees outside of their buying platforms, in Excel.
Make no mistake. Excel is a great piece of software. It has many useful applications. There can be little denying, however, that the process as described above (which we see agencies employ on a daily basis) is in no way ideal. It is not automated, efficient, transparent, or for that matter reasonable.
When challenged on these issues, agencies point to limitations in the buying platforms themselves, or to “standard practices”, or often to “other, higher priorities”. However, this is not a new issue. This process gap has existed for many years, and even as automation explodes in other parts of the media industry, there has been no real improvement in the way that national TV buys are stewarded and reconciled.
Entirely Reparable, And Worth The Effort
Consider programmatic buying again. Although not yet a major factor in national TV, it has become an increasingly common way to transact digital display and other digital media buys. A common type of programmatic buying – Real Time Bidding (RTB) – involves ads being sold on open exchanges in real time.
Without going in to the minutia, suffice it to say that this process is technologically staggering. As a user’s web browser opens a web page, a complex open auction is taking place. Buyers are searching vast amounts of data to determine the value of that user (or the user’s browser, technically), and making bids. The website publisher determines a winning bid, notifies the winner, and the victorious advertiser serves the ad into the user’s browser, on the page next to the content. If you are not familiar with the process, there is a 2-minute video overview that will give you goose bumps.
All of this (and more) happens in about 2 tenths of a second – so fast that users do not even discern a difference between the loading of the content and the loading of the ad. Every single ad unit sold in this fashion is a separate transaction. A separate line item, with all relevant data captured. There are hundreds of billions of such transactions in the US every single day.
Let’s put that another way. There are more programmatic display occurrences (line items, each its own transaction) every single day, than there are national TV occurrences in an entire year. Yes, each national TV unit reaches multiple viewers, but from a data standpoint, each is only one occurrence or line item. Meanwhile, each of those digital display occurrences cost pennies (or perhaps dollars). National TV spots often cost thousands, even hundreds of thousands, occasionally millions of dollars.
So, let’s review. Far fewer individual occurrences than programmatic display, but each line item representing much more money (and billions of dollars in total). Mostly being managed sort of electronically, but also kind of manually. A little here, a little there. Sound ok?
We often ask Clients whether they would be comfortable with any portion of their own internal operations being managed in such a fashion (particularly one representing such a tremendous financial investment). The answer is invariably “no”.
So, the question is this: what’s it going to take for the industry to fix what is clearly a deficient – and entirely fixable – process?
Stop Accepting It
- Clients should demand that their agencies manage these substantial investments in an automated, transparent fashion using a single central resource. Timetables should be established for upgrading this process, and agencies should be evaluated by their Clients to confirm compliance.
- If necessary, agencies (who are, after all, the customers of the buying platform developers) should work with providers to assure that platforms are improved to accommodate an automated, transparent end-to-end supply chain process.
The resistance by the industry to further automating this process (particularly in light of all of the professed excitement over programmatic TV buying) is more than a little puzzling, and quite frankly should no longer be tolerated by advertisers.
If you enjoyed this post, you might also like “Are You Paying Your Agency’s Digital Media Billing Too Soon?“.
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