Programmatic TV emerged as a solution for marketers and advertisers to better determine the number of viewers watching a particular television program. According to eMarketer, advertisers spent $21.52 billion on programmatic TV advertisements in 2023, a figure that will reach $28.95 billion in 2024. Now that the world is moving toward a cookieless future, advertisers are focusing more and more on first-party assets.
eMarketer data shows that 14% of advertisers and 32.7% of publishers believe programmatic direct deals to be an effective advertisement solution in the post-cookie digital world. That’s probably why CTV advertising revenues are forecasted to enjoy an annual compound growth rate of 10.4% from 2023 to 2028.
Another eMarketer report forecasts that U.S. ad spending on linear and CTV platforms will exceed $93 billion by 2025. Based on the current trends, programmatic TV has a bright future in advertising.
What Is Programmatic TV?
Programmatic TV advertising refers to the automated buying and selling of TV ads. In other words, it is a data-driven way to deliver video content to a targeted TV audience.
This high-tech approach automatically collects data to find a precise target audience for a broadcast. It also helps advertisers to allocate targeted ads in a TV broadcast better.
Programmatic TV gets confused with smart TV devices and advertising tactics, so let’s highlight some key terms and their differences.
Programmatic TV Versus Linear TV
Linear TV is the traditional way to view content on a television set. Viewers tune into a specific channel at a scheduled time to watch their favorite shows or movies. For instance, you have to tune in at a set time to watch a football game, and you need to go to a specific channel or network to do so.
Linear TV is also known as broadcast TV. It includes channels like ABC, NBC, CBS and FOX. Linear TV has been the primary way of watching television for many years before the rise of streaming services. Even today, some people prefer linear TV for its convenience and familiarity.
Due to streaming services, not as many people tune into television shows as they used to. This is one reason why advertisers are shifting away from linear television ads. However, that doesn’t mean linear TV advertising is gone for good. In 2023, U.S. advertisers spent an estimated $61.31 billion on linear TV advertising, compared to $21.52 billion on programmatic.
But future trends will favor programmatic, as linear spend is expected to gradually decline to $56.83 billion by 2027. Meanwhile, total CTV advertising spend — 90% of which is programmatic — is expected to reach $40.9 billion by the same year. As more viewers turn to streaming services, programmatic ad spending will rise with CTV.
The difference between programmatic TV and traditional linear TV lies in how advertisers buy media and place ads. With linear TV, ads are placed based on generalized factors such as schedules, viewership numbers, airtimes and ratings.
Programmatic TV advertising is a method of placing multiple ads on different platforms — linear, connected and more — at once using automation.
In addition, it uses real-time viewership data from devices and an algorithm to determine which ads to show to specific audiences. For instance, with programmatic TV, you aren’t basing your audience targeting solely on people who are watching The Bachelorette. Instead, you can target specific audiences like women in their twenties and thirties with an income over $60,000.
This allows advertisers to be more precise with their targeting, ensuring that the right audience sees their ads. The approach is a stark contrast to linear TV, which often relies on broad demographics for ad placement.
Advanced TV Versus Programmatic TV
The term advanced TV refers to the many forms of streaming TV content. In this format of content delivery, broadcasters deliver messages and connect with target audiences in more meaningful ways than traditional TVs. Popular forms of advanced TV include TV Everywhere, addressable TV, connected TV, video-on-demand (VOD), ad-based videos on-demand (AVOD), subscription video on-demand (SVOD) and free ad-supported TV (FAST).
Addressable TV Versus Programmatic TV
Addressable TV refers to the advertisements inventory available through set-top boxes (cable) providers such as Comcast and Time Warner. Aside from cable, addressable TV can deliver content via satellite, Internet Protocol TV (IPTV), linear TV or video-on-demand inventory.
The most notable feature of addressable TV advertising is that it enables advertisers to segment TV audiences. You can serve different ads or groups of ads called ad pods within a program or TV screen. Addressable TV ad buyers target audiences based on their demographic, geographic, behavioral, and even self-selected individual households.
According to recent calculations, advertisers spent $2.14 billion on addressable TV ads in 2020. The figure will increase to $4.14 billion by the end of 2023.
How Does Programmatic TV Advertising Work?
In simple terms, programmatic TV advertising is the automated buying and selling of ads on TV based on specific audience data. Programmatic advertising solves the problem with traditional TV advertising, which has made advertising unavailable for advertisers with low budgets and those with targeted ad messages.
With traditional TV advertising, the ad buyer and the publisher have to negotiate and collaborate to determine an ad spot that suits them both. These negotiations are typically lengthy and inefficient and often result in the advertiser over-paying for airtime.
Programmatic TV advertising automates the process of selling TV ads. Using a data-driven AI algorithm, advertisers can quickly view which potential ad spots are available to book. They can identify the ideal target audiences, set their budget, and input all the variables they need to bid for advertising spots in real time. The algorithm will factor in these variables to find the ideal time to display ads to the targeted consumers.
The process of advertising on programmatic TV is simplified and automated. Because fewer humans are involved in the bidding and time spot allocation, there is a reduced risk of overpaying. It also allows advertisers to optimize their ads by adding or removing the ad’s content at any time during the marketing campaign.
How To Buy Programmatic TV Ads
There are three main ways to buy programmatic TV ads:
1. Real-Time Bidding (RTB)
Also called real-time open auction, this is the most popular way to buy programmatic TV ads. The prices of advertising spots in this online auction vary depending on supply and demand. As a result, it is the most cost-effective way to advertise for both advertisers and publishers.
2. Programmatic Direct
The publisher sells ad spots at a fixed price per number of impressions. In this method, the advertiser can choose which ad spots they want to purchase and at what price. There’s no exchange party in the middle. Instead, the publisher and advertiser make a direct deal.
3. Private Marketplace (PMP)
This is another real-time auction for advertising spots, but slightly different. The auction is available to a limited number of advertisers. Advertisers must be invited or apply to participate in a private marketplace.
Alternatively, you can work with a programmatic ad agency to create, place and manage your digital ad campaigns for you.
Benefits of Programmatic TV
Here are the top four benefits of programmatic TV advertising:
1. Data-Driven Ad Targeting
Unlike traditional TV advertising, programmatic advertising is data-driven. Advertisers have greater control over audience targeting. The flexibility and automated nature of ad delivery help advertisers reach the right viewers.
For instance, if you are a cosmetic brand, you can target viewers who watch beauty and fashion-related shows. That’s much more effective than showing a beauty ad between a baseball game, where only a tiny percentage of viewers are actually interested in the product.
2. Automated TV Ad Buys
Programmatic ads use AI solutions that enable advertisers to create a single media plan and use it to target an audience over multiple channels. For instance, an advertiser’s campaign may include various media channels like video and native media advertising. Consequently, this increases the reach of the campaigns and visibility.
3. Advertising Price Transparency
Programmatic TV advertising enables advertisers to set the budget while bidding on ads. The pricing model is more transparent than traditional television ad buying. It provides an overview of places where ads will run and estimated costs even before the advertiser makes a successful bid.
4. Real-Time Optimization of Ad Content
Finally, unlike traditional TV advertising, programmatic TV makes it easier for advertisers to optimize their ads and receive real-time performance reports. Publishers, too, can follow the automated bidding process and optimize ads for better placement based on strategy and ad viewability.
The Rise of Programmatic TV Is Already Underway
Programmatic TV has uncovered new possibilities and advertising potential in ways that traditional TV would never have. The future of television advertising lies in programmatic. As more and more viewers cut ties with linear TV, CTV will be there to take its place — marking a clear path for the dominance of programmatic TV advertising.
Interested in learning how you can amp up customer loyalty with the right digital marketing strategies?
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Rich Powell is the senior vice president – national multi-location sales at Goodway Group. He oversees the multi-location sector, where his responsibilities include the development and execution of a go-to-market strategy for revenue growth, sales development, marketing and profitability analysis.