Is Programmatic Buying and Selling Inevitable? - Hank Close

I continue to be struck by the divide between the TV and digital worlds as regards programmatic buying. When I think of TV networks’ stance, I’m reminded of those awful high school dances and the brave few moving their feet, outnumbered by the queue with their backs against the wall, waiting for a better moment that never arrives.

It is clear that marketers are continuing to invest more in new data sets and RTB. As video investment gains fluidity across all screens, it will pay to be a TV first- mover/learner on the dance floor. The seller’s objection to this strategy mostly involves a fear of commoditization, as well as the changes implied for negotiations, reweights, systems, and back-room management of remaining inventory. These are significant considerations, although none are unbridgeable given that initial inventories offered would be a tiny percentage of the total sold.

Cable TV ad economics are challenged by maturing budget levers. Three of the four drivers in cable ad fortunes are largely maximized – distribution, ratings, and commercial load. The final of the four – CPM, is constrained by a chunky economy and a healthy supply of rating points across the cable spectrum, only a small percentage of which are premium and exclusive as defined by buzz and Nielsen verities.

The average cable network sells in the vicinity of 200,000 equivalized :30’s annually. Most sell broad dayparts and discount all but primetime aggressively. No leader at any network or group of networks wants to believe these inventories are commoditized, though the successful packaging of them doesn’t necessarily suggest otherwise. A healthy percentage of direct-response commercials in these non-prime dayparts affirms not only that a new sales channel may be additive, but also that non-prime inventory is desirable on a performance basis.

CPM is the only lever over which sales leaders have any real control. Broadcast television, on a price metric, has an advantage – they play for different demographic dollars in each defined daypart they sell, and on a 24-hour basis, sell far less inventory. And, there are only a handful of broadcast nets – hence, scarcity. Cable networks have a path to carve out in driving the remaining CPM lever toward parity, and that involves competing more exclusively prime vs. prime.

Programmatic selling represents only one pillar of a strategy to get there. New data sets applied to traditionally low-value inventories are finding hidden gold in non-prime audiences. Historic TV data sets have not been able to identify those values as definitively as we can today, and better tomorrow. The effect of discovering a longer tail list of low-touch clients willing to pay for a qualified audience defined by a currency other than a Nielsen demo is tantalizing. At the very least, it represents an opportunity to learn about an emerging market in which the network still retains the ultimate decision-making power.

It begins. Step one is to make the decision to move forward and accept programmatic buying and selling as an inevitability. Step two is to move your feet in tandem for profit.

Hank Close, currently serving as Founder, Close & Co., LLC is a forward-looking sales and marketing executive focused on advising both traditional and digital media companies in maximizing top and bottom-line performance. Mr. Close's experience leading to his current role includes running multi-screen cable and broadcast network advertising sales, research and marketing operations. He employs a relentless focus on driving revenue growth, breakthrough ad models, and organizing structurally for efficient success. He has broad and recent experience in the emerging media. This includes social platform product design and advertising modeling, digital video strategy and monetization, content brand delineation, as well as go-to-market strategies in the mobile, second-screen, on-ground events, interactive TV, and digital out-of-home spaces. Hank can be reached at hfc@closeandco.com.

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