How Content Owners Will Make More Money Than They Do Today

Automation will lead to higher CPMs

The TV business is at the top of its game. The content is better than ever, and yet some people are uneasy. Content owners and sell-side tech providers are worried that with things as good as they are, there’s nowhere to go but down. Specifically, they point to the massive shift to digital that’s happening in TV. Terms like “programmatic,” “RTB” and “exchange” trigger jolts of anxiety.

Truth be told, there is no race to the bottom. Just as content has entered a second golden age, media sales are integrating the best features of digital. Thanks to automation and addressability—a combination I call “Advanced TV”—content owners are going to make more money per advertisement than they do today.

Automation is coming to the TV industry, and with it better targeting and increased transparency in every deal. This is good for advertisers, but it’s also good for sellers, because Advanced TV represents a better product. Let me explain.

CPMs are rising, not falling

The biggest myth on the buy side is that Advanced TV will drive down CPMs. That’s just not the case. In fact, I routinely counsel advertisers that they should expect CPMs that are at least on par with, or even higher than, what they’ve paid in the past. How could this be?

First, television inventory is scarce. Automation won’t change that—whether a deal is transacted face-to-face or algorithmically, the laws of supply and demand remain the same. So as long as there’s a limited amount of television inventory—a reality that won’t change anytime soon given the cost of producing and marketing programs—CPMs will remain strong.

Second, Advanced TV buyers should expect higher CPMs because they’re buying more than just the inventory itself. They’re also buying the addressability that comes with deep audience data. Put simply: Advanced TV gives advertisers greater reach and efficiency, and because they’re getting more value, they’ll pay more for it.

Upfronts will continue

What is an upfront? While any television industry veteran can rattle off a comprehensive explanation of the process by which networks pre-sell premium advertising inventory, it’s really pretty simple. An upfront is the commitment of ad dollars for impressions that will be served at a later date, period. In the stock market and in programmatic buying, we call this the forward market, and it’s a thriving marketplace where buyers and sellers can transact in the “traditional” way while still retaining the audience targeting digital’s real-time bidding market has created.

In an upfront, or forward market buy, we see dollars flow into the private marketplace where only a select group of premium advertisers are allowed to participate. That model has worked so well in television that premium online publishers are embracing private marketplaces, which help guarantee better prices and more control for sellers.

But while networks will always make the decision regarding which inventory is sold through an upfront, what happens inside private marketplaces, both upfront and otherwise, will depend greatly on programmatic for two reasons: First, programmatic provides an essential tool for executing specific audience guarantees that sell-side sales teams negotiate into media buys. And second, both buyers and sellers need programmatic to leverage multichannel offerings and rich audience data, otherwise upfront sales will be less effective than media bought through other means.

Retained control over creative and channel conflict

When television sales teams criticize programmatic, they often point to the early experience of online ad networks where publishers lost control of the creative running on their sites. In television, that fear is further compounded because networks are no longer just selling television inventory—they’re also selling digital and mobile, creating a potential for channel conflict. Those are understandable concerns. But the main reason the sell side won’t lose creative control and fall into a labyrinth of channel conflict is that the demand side can’t allow it.

Advertisers are clamoring to buy audiences instead of demographics, but no matter how much they automate or how effectively they use data to pinpoint their messaging, advertisers still want to know exactly where and when their ads are running. For that reason alone, buyers are heavily reliant on strong sell-side controls.

But there’s also upside in the reasons why sellers must retain control. One of the prime selling points of Advanced TV is the new ability to attribute successful campaigns across all digital channels: TV, video, display, social and mobile. By leveraging controls such as price floors and data overlays, sellers aren’t just guarding against market failures. They’re also creating a complementary reason to buy.

Less friction

Roadblocks to buying media hurt advertisers because they force advertisers to find an alternative solution. But roadblocks hurt sellers even more because they erode price, or worse, cause inventory to go unsold. Friction exists throughout the television ecosystem, but it’s most pronounced in the local space.

Local television sales have always been limited by the buying power in the local market, and the ability of the seller to break out of that market and sell a local footprint to national advertisers. Obviously, you can’t change the size of the local market, which is why there’s a cottage industry of aggregators that pull together hundreds of local markets for national advertisers.

Unfortunately, aggregating local TV markets is burdened by friction. Typically, national advertisers looking for a local footprint must negotiate with three to five different partners for a single media buy. And that’s just the friction inherent in setting the deal. When the buy is executed, the advertiser must then traffic assets to those three to five partners.

One of the most valuable benefits of Advanced TV is that it takes a hammer to friction. Instead of working with five partners, national advertisers can access local markets through a single dashboard. Equally important, that dashboard makes trafficking more efficient, because advertisers can use standardized assets and instructions.

As buyers and sellers work together to build Advanced TV, they will create a more efficient, transparent market. Sellers will soon discover what Web advertisers have proven over the last decade—maintaining rates on current inventory on yesterday’s tech is impossible, but raising rates with better targeted, addressable ads will make sellers and content owners rich.

Advanced TV is a win for advertisers, agencies, content owners … pretty much everyone. Including the sell side.