TV Networks Are Building Internal Ad Tech as They Dive Deeper Into Streaming

First, TV viewers ditched cable for streaming. Then, the ad dollars followed. Now, media companies are rapidly building tech to support and grow the $10 billion-plus connected TV advertising market. Last week, Disney unveiled its Disney Real-Time Ad Exchange (DRAX) platform, a solution to establish parity for all deal types in premium video. Discovery and ViacomCBS have also built similar solutions, highlighting traditional media’s continued push into digital, according to multiple sources. Discovery’s platform is called Wisteria, a name used internally and subject to change as the solution is likely to grow and evolve. Launched in January, Wisteria has a dedicated team within Discovery. Jill Steinhauser, Discovery's svp of ad sales, planning and operations, said the platform creates a single layer where partners can integrate instead of connecting to multiple distribution points. “It provides common ground across all the ad tech stack, whether it's our ad tech or the partner's ad tech,” said Steinhauser. ViacomCBS declined to comment. What does the tech do? DRAX, Wisteria and ViacomCBS’ platforms are all proxy servers, which act as a mediation layer between the ad server and server-side ad insertion. They help networks manage inventory across their expanding connected TV footprint, collecting ad requests across myriad properties including ad-supported direct-to-consumer apps like Hulu or Discovery+; local media aggregators like Tegna; distribution partners like the Roku Channel or other free ad-supported streaming services. These platforms don’t decide on ads or execute bids. Instead, they help networks manage their direct sold and programmatic campaigns by collecting ad requests from various endpoints and telling the ad server which is the optimal request. For example, a network may have reserved an ad slot upfront for $20 within one of their streaming apps, but the proxy server can make an ad request ahead of time and receive a bid of $30 for the same placement. That information is sent to the ad server for the app, the original reservation is fulfilled another time and the network has effectively boosted its margin. By creating a new piece of the ad tech stack that can see across a network’s entire streaming footprint, media owners are hoping to better manage dynamic ad pricing, competitive separation and audience de-duplication. With this technology, Morgan said media owners can build out their capabilities around first party audiences and data management. No open marketplaces Proxy servers look similar to header bidding wrappers of the desktop display world, which help publishers manage competition of its ad inventory. Aside from a few technical differences, the main differentiator is that TV networks are showing no interest in moving to open auctions, which is the leading way of clearing inventory in display. Instead, networks are using these solutions to simply increase their capabilities in automation and expose audiences to advertisers. “I hope we don't get to a place where [you] throw all your inventory into an open exchange and see where it lands,” said Steinhauser. Dave Morgan, CEO of Simulmedia, said media companies moving further into digital are investing in their programmatic stacks in order to sell more campaigns based on audiences, not just programs. He said networks have no advantage in exposing the price and availability of their inventory, given its scarcity. The best option is to mediate it instead of moving to open auctions like in display, Morgan added. “What's really important here is that the TV ... programmers are able to manage how much information is provided and when and to whom. So, they've been really, really big about trying to create a highly robust private marketplace system that can, in an automated way, replicate what they're able to do with phone calls and faxes and handshakes in upfronts and scatter,” Morgan said. By creating a single entry point to inventory, these proxy servers are helping media owners showcase more of their inventory and better manage yield, leading to an increase in both programmatic guaranteed campaigns and audience-based campaigns. Eventually, Steinhauser said this will lead to a hybrid version of programmatic guaranteed and private marketplace deals, where advertisers commit to a certain level of spend but can flexibly decide where and how it’s allocated. “The benefit is that [networks] maintain control over price,” said Tracey Scheppach, CEO of Matter More Media. “Flexibility is key, given the last year. So how can you be flexible to the buyers needs, but still try to have some certainty about your revenue?” It's a significant investment Big networks are making significant investments in their ad tech stacks to support their streaming-first futures. This follows massive reorganizations at some major media companies that put digital as the key focus over linear TV. But—similar to brands that have tried in-housing tech—these media owners have to contend with the significant costs in not only building solutions, but also hiring and nurturing the relevant workforce. “We could have probably built it with a third party. But our choice was to build it internally, so that we had ultimate control of it. Also, the tech partners that are building them have a stance on demand and revenue. And our preference is to remain neutral,” said Steinhauser. Simulmedia’s Morgan said such technology helps media owners build out their capabilities around first party audiences and data management. "Yes, it’s helping them transact with advertisers a lot, but it’s also helping them build longer-term defensibility akin to how publishers became a little too dependent on third-party cookies, only to have them wiped out,” he said. Hey Google! So, What’s Next for Ad Tech?