Do you have questions about programmatic TV ads?
Are you curious about where they came from and where they’re headed?
You’re not alone.
Today, programmatic TV ads are firmly on the path to becoming a mainstream advertising solution. Perhaps this is because a post-cookie world is upon us, or it’s part of a broader understanding of the multi-touch consumer buying cycle.
Either way, the numbers don’t lie—in 2022, programmatic TV advertising will, for the first time, account for over 20% of total programmatic video ad spending. It will also make up 10% of total programmatic digital display.
Globally, all programmatic ad spend (including TV) is skyrocketing. It’s set to surpass $493 billion in 2022, according to Statista.
With all the growth and popularity, learning more about the origins of programmatic TV advertising makes sense. This post will cover exactly that—the evolution of programmatic TV ads including where they came from, why they’ve grown, and what we can expect from them in the future.
Let’s get started!
The Origins of Programmatic TV Ads
Programmatic TV ad buying hasn’t been around long—it came into use around 2017. When you take into account the overall timeline of television, there’s not a ton of history there, relatively speaking.
If you’re an ad nerd like us, what probably stuck out to you on that timeline was the invention of smart TVs in 2007. Programmatic TV ad buying is made possible by Connected TVs (CTV); that is, televisions with an internet connection.
Linear advertising, the traditional method of buying TV ads, operates off of time of day and demographic data. Basically, it’s a method using common sense in coordination with Nielsen targeting. It’s the reason advertisers used to advertise sugary cereal during Saturday morning cartoons.
But linear programming—the idea of having to turn on your TV at a specific time to watch a specific program—is waning heavily. Video on demand (VOD) and subscription video on demand (SVOD) have changed consumer behavior. It no longer makes sense to solely buy TV ad space in linear blocks.
In short, two things happened within a very short period:
- Many people stopped watching television programs linearly
- Advertisers had access to *new household targeting data
*The ‘new’ data is essentially making existing digital data available for TV targeting. Tactics like IP targeting with enhanced machine learning and cross-device capabilities—good for large scale and high matching rates—are now available for programmatic TV.
This presented the perfect situation for programmatic TV ads to disrupt the traditional model, and they have.
The Growth of Programmatic TV Ads
First, we need to address the term “programmatic TV.” While it was popular some five to eight years ago, it’s now somewhat outdated.
Think of it this way—using the term in reference to the present (as well as the future) is like walking up to a person with a 2022 Porsche and saying “nice automobile!”. It’s technically correct, but it’s out of touch. The new term is programmatic CTV.
Now that we’ve clarified the term, let’s look at the other areas of programmatic TV ads growth.
As we mentioned earlier, the use of programmatic CTV by media buyers is increasing. Programmatic ad buying is up in general, however, CTV stands out with especially large increases. There are plenty of good reasons for that, but the bottom line is this:
Every advertiser has business and marketing objectives to reach. When it comes to digital media, they have access to a single advertising system that automates planning, buying, and measurement across channels, screens, and formats. Why not buy TV ads the same way?
Utilizing the same system that has made programmatic ad buying for digital media is an easy call, but that’s not the only benefit advertisers seek to gain.
Another potential boon for advertisers utilizing programmatic ad buying for TV is the availability of various advertising channels. For example, Sling TV provides programmatic buying opportunities for live TV broadcast events like sports and award shows. Access to these traditional forms of programming provides the best of both worlds for programmatic ad buyers.
With digital media, advertisers have long stressed the importance of displaying the right ad at the right time. Apart from ease of use, this type of flexibility is arguably the primary benefit of all programmatic ad systems. With dynamic ad insertion, this level of flexibility in timing, content, and device type is now available on CTV.
Over the years, cable and satellite providers have also taken notice of programmatic. In April 2020, DISH Media announced that its set-top box VOD ads were available for programmatic purchase with real-time bidding. Using dynamic ad insertion, DISH offers its entire ad inventory to programmatic buyers, thus attracting digital ad budgets that weren’t historically spent on TV.
So where is programmatic TV headed? Glad you asked!
The Future of Programmatic TV Ads
Given the history of programmatic CTV we’ve covered so far, what we know about its capabilities, and what we’ve observed in terms of changes in audience behavior, we have an advertising solution that is going to keep growing.
Google’s plans to stop the use of third-party cookies in Chrome are looming. This journey towards a cookieless world will probably continue to push the growth of programmatic CTV as advertisers adopt solutions that drive results without breaching privacy regulations.
In short, the future of programmatic TV will likely manifest itself in several other ways:
1. Increased Viewership and Spending
As TV watchers become increasingly dissatisfied with the high cost of traditional TV, cord cutting is increasing. In the U.S alone, major cable providers collectively lost 6 million pay-TV subscribers between 2019 and 2021.
On top of this, linear TV ad spend is shrinking. The share of video ad spending going towards linear TV went from 71% in 2020 to 57% in 2022. On the other hand, CTV ad spend is increasing. This trend will likely continue, especially since traditional TV penetration is expected to drop below 50% in 2026.
2. Ad Tech Advancements in Targeting and Ad Fraud Detection
Programmatic CTV is disrupting the advertising space with new technologies such as machine learning and artificial intelligence (AI). Already, we’re seeing how the deluge of data provided by AI is helping advertisers to target the right people with the right message, at the right time. This will only continue to rise.
Still on technology, we’ll also likely see technology advancements improve fraud detection in the programmatic space. There’s been an increase in the number of cases related to CTV advertising scams—in Q4 of 2021, 18% of the unprotected CTV ads that were traded programmatically were fraudulent or invalid traffic.
Going forward, we’re bound to see the emergence of technologies that minimize or even eliminate these threats.
3. Subscription Services with Ad-Supported Tiers
On August 10, 2022, Disney+ introduced its ad-supported plans. Netflix is expected to follow suit in early 2023.
This move—traditionally ad-free subscription services offering ad-supported tiers—could fuel further growth of programmatic CTV, particularly since advertising-based video on demand (AVOD) already occupies a large portion of CTV space.
In a world where competition for consumer attention is fierce, premium advertising spots on platforms like Netflix and Disney+ will be great for advertisers looking to tap into the brands’ connection with their customers. Programmatic CTV will be right there to help advertisers serve the right ads at the best times.
The Future is Here
As you can see, the ‘future’ of programmatic CTV ads is here. The experimental phase is behind us, and CTV is quickly becoming an essential part of an integrated digital ad strategy for brands and businesses.
The opportunity to reach niche target audiences at home is too big to ignore. If you have any questions or would like to talk about programmatic CTV in depth, feel free to get in touch with us.