The Future of Programmatic TV

Marketing Transformation

The Programmatic Revolution

For years, programmatic technology has revolutionized the way digital media is targeted, executed, and measured. As a result, advertisers have benefited from reduced complexity, lower costs, better data, and more precise targeting. Until now, this emerging technology has been limited to desktop and mobile devices, an attribute that changes as programmatic television extends its reach to the traditional, household television set. 
Enter Programmatic Television.

In this piece from Razorfish, we help marketing, media, and advertising executives understand the future of programmatic TV, including its primary opportunities and adoption hurdles. We close with our conclusions and recommendations for how executives should be assessing this technology for their own situations: 

  • What Is programmatic TV and how does it work?
  • What are the key opportunities for programmatic TV?
  • What adoption hurdles still exist?
  • Conclusions and recommendations


What Is Programmatic TV and How Does It Work?

Programmatic TV creates value and operational efficiency for both buyers and sellers by automating the planning, buying, and selling of impressions from available television inventory. As a marketing investment, this technology currently offers three investment paths, each with its own distinct advantages:

1. Connected TV (CTV) offers the most precise targeting

CTV offers 1:1 unique targeting when reaching audiences (for example, Samsung Smart TVs, Roku, Apple TV, and Amazon Fire). CTV consists of a TV set with resident Internet capabilities or connected via over-the-top (OTT) devices such as Blu-ray players, or gaming consoles — all with the ability to access long- and short-form web content. CTV represents the convergence between computers, TV sets, and set-top boxes.

2. Linear addressable TV widens targeting opportunities

Targeting opportunities expand with this approach and its 1:1 household targeting by distributing through multichannel video programming distributors (MVPDs), for example, Dish, DirecTV, and Charter. With this approach, brands dynamically serve different ads to unique audiences (that are watching the same program) or video on-demand (VOD) on Internet Protocol Television (IPTV) or set-top boxes. Audiences can be further segmented by behavioral, demographic, or geodata from first-, second-, or third-party.

3. Linear TV audience indexing expands reach even more

This approach is even broader than Linear Addressable TV with its one-to-many audience targeting opportunities. It is also the truest representation of programmatic TV technology capabilities as they exist today. Linear TV Audience Indexing is essentially linear TV programming advertising purchased through automated workflows coupled with the ability to use hyperdata-informed audience indexing.

Understanding and discerning the players

Regardless of the investment path you choose, multiple players will be involved to facilitate the buying and selling processes that all fall within the programmatic TV landscape (See Figure 1). For example:

  • TV advertisers and media agencies who plan and buy the campaigns
  • The demand-side platforms (DSPs) who act as programmatic buying platforms to marry the data from DMPs and execute the buy
  • The supply-side platforms (SSPs) who act as programmatic selling platforms. SSPs integrate into legacy TV systems for each network to make the automated buy possible
  • The data management platforms (DMPs) who provide audience data, engagement metrics, and purchase data to enable smarter buying decisions
  • Broadcast networks who supply and monetize the inventory
Figure 1. The market for programmatic TV draws on a number of players representing buyers, sellers, and target audiences. Source: TubeMogul
Figure 1. The market for programmatic TV draws on a number of players representing buyers, sellers, and target audiences. Source: TubeMogul

What Are the Key Opportunities for Programmatic TV Advertising?

Fine-tune your audience

While Nielsen’s age and gender segments have long been the primary currency of the TV ad market, programmatic TV targeting can go beyond the reliance of broad targeting and Gross Rating Points (GRPs) to determine desirable audiences. Instead, marketers can identify a more specific subset based on first- or third-party audience insights.

Significantly streamline ad buys

Traditionally, the workflow for the TV ad-buying process involves tedious back-and-forth negotiating and the exporting and importing of data from one closed system to another. One of the most significant promises of programmatic TV is to streamline ad buys and automate many processes that are still being done manually.

Improve measurement and attribution

The programmatic TV model reflects a true cohesive method to aggregating multiple data and inventory sources for more informed planning, forecasting, optimizing, and reporting. While this is intended to be a strong opportunity, it represents a work in progress for many partners and platforms.

Programmatic TV.

What Adoption Hurdles Still Exist?

Limited reach and scale

Both of these factors are dependent on the supply-side platforms and currently do not offer the same capacity to deliver a message to the entire linear TV universe as traditional TV ad buying currently does.

Not yet perceived as win-win  

Hesitancy exists on both sides. TV networks have a lucrative business model they don’t want to ruin, and they are wary of letting advertisers cherry-pick specific shows and ignore the rest. From the buy side, advertisers are concerned the inventory offered is remnant and low quality. 

Capabilities are still evolving

Many things are different in programmatic TV technology compared to its digital counterpart. Currently, the standard TV pricing is on a flat CPM versus dynamic. There is little to no transparency into media costs and fees — something that digital programmatic platforms often tout. Digital programmatic technology’s core is reaching an audience in a 1:1 environment, an area where programmatic TV is barely scratching the surface.

Programmatic TV.

Conclusions and Recommendations

Advertisers are hungry for a more efficient, targeted TV medium

Traditional TV ad spending is projected to reach almost $84B per year by 2018, with the majority occurring during the upfronts. Any unsold TV inventory goes into the scatter market, which operates much like site-direct digital ad buying, where buyers go to each inventory owner individually, negotiate fixed pricing, and are guaranteed to run what they book. 

This is fine for sellers, as they maintain full control of the inventory and pricing. But, with the proliferation of content providers and the increased targeting capabilities available in digital, advertisers and agencies are hungry for techniques that turn TV into a more efficient and targeted advertising medium. 

Integration still an issue

Traditional TV ad buyer and seller roles are going to need to be much more integrated, with role responsibilities encompassing both traditional TV and programmatic digital know-how. The technology also needs to reach a point where it encompasses all TV ad-buying opportunities (e.g., local TV markets, OTT boxes, addressable TV, etc.). The industry is currently at a point where many programmatic TV partners are offering fragmented technology capabilities. Each of these platforms is more or less isolated and bought and sold separately — ultimately limiting its intent to become a seamless process.  

Evaluate the technology against your unique needs

Digital experienced a similar trend, which led to the birth of ad networks and ultimately programmatic. The same evolution pattern is expected for TV ad buying and will likely affect projected spend on traditional TV advertising in the coming years; however, just like digital sponsorships or larger media executions, there are a few outliers, like sports moments or live TV events, that may take their time making it into the programmatic world. In the meantime, marketing executives should evaluate the state of the technology against their own needs with pilot projects.

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