THE PROGRAMMATIC TV AD EXPLAINER: Forecasts, top trends, and barriers to adoption in the programmatic TV ad-buying space

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The TV ad industry is one of the largest ad segments in the US — and it's ripe for digital disruption. The first TV commercial aired in the US in 1941, and it featured an ad for Bulova watches during a Brooklyn Dodgers baseball game.

While there have been advancements in TV ad buying since Bulova’s commercial, the audiences that TV commercials target are still based on broad demographic data, like age and gender, and are aimed at maximizing reach. Although TV ads remain highly effective, targeting can be greatly improved by introducing more digital data into the mix.

Digital display advertising was disrupted by programmatic technologies because of the operational efficiencies gained from automating manual processes. But TV is a completely different animal. The TV advertising space is entrenched in traditional processes that largely depend on direct negotiations between ad buyers and sellers. By incorporating more data, TV advertisers can fine-tune their targeting beyond broad consumer groups, and potentially see higher returns on their ad spend.

But the way consumers watch TV content is changing, and data collection is getting more expansive. Disrupting an ad industry with a history spanning over eight decades will be a significant hurdle for programmatic TV (PTV) adoption.

A new report by BI Intelligence explores the drivers of programmatic TV adoption and the value advertisers and TV companies can derive from hyper-targeted audiences. It also highlights the key differences and similarities between programmatic TV and digital display, and assesses several potential barriers to PTV adoption.

Here are some of the key takeaways from the report:

Programmatic TV is a small, but growing opportunity. PTV is still in very early days, with ad spend reaching an estimated $1 billion in 2016, just over 1% of traditional TV’s $73 billion.
Precise targeting is what will drive more PTV adoption. Unlike in digital display advertising, where the promise of programmatic is tied to increased efficiency through automation, PTV’s value proposition is tied to better targeting.
Programmatic is slowly infiltrating the upfront process for primetime buying. More networks are providing tools for advertisers to incorporate advanced data targeting with premium upfront buys.
There are several barriers for PTV adoption. Some TV execs are worried that incorporating programmatic trading of TV inventory can potentially devalue their stores.

In full, the report:

Forecasts US programmatic TV ad revenue through 2021.
Highlights the top beneficial attributes of PTV.
Explores some of the top barriers and challenges to PTV adoption, including measurement hurdles and fears around commoditizing TV inventory.
Outlines strategies some networks are taking when incorporating PTV in their upfront offerings.

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