The tangle of channels that makes up programmatic TV is drawing a lot of attention right now — and generating a lot of confusion. Traditional TV broadcasters are entering the digital space rapidly, and they’re influencing the way digital media is transacted and measured. Meanwhile, broadcasters find digital distribution channels present a whole new set of issues for them. We sat down for a conversation with Randy Cooke, VP of Programmatic TV at SpotX, to help humanize some of the key issues in this growing space.
GAVIN DUNAWAY: Randy, I know you’ve been at SpotX since December. What does your role as VP of Programmatic TV entail?
RANDY COOKE: I have a lot of insight on the economics of audiences, how audiences flow across channels. My primary charge at SpotX is building out systems that are going to be used by broadcasters to maximize yield at a campaign level for advertisers wanting to buy audiences wherever they appear. How do you create a holistic campaign leveraging traditional broadcast TV audiences, as well as the digital distribution channels, so that an advertiser can holistically reach a very targeted consumer irrespective of how they choose to consume content?
In order for that to happen on the broadcaster side, you need to have the inventory management tools, the yield optimization tools, to manage at a maximal yield. So my focus has been in architecting these systems that would allow that holistic inventory management system to come into play.
G: So that’s all built out now, right?
R: It’s close. Let me preface this by saying I think the concept of programmatic is always going to be referred to in the future: What will programmatic be?
The proliferation of data, as well as the technology to synthesize those data sets, necessitates an evolution to achieve a broadcaster’s goal in a programmatic world. Right now, we are doing this in partnership with clypd. clypd has a particular domain expertise in optimizing linear television inventory in broadcast. In broadcast television, you can optimize any number of ways vertically across a broadcaster’s linear programming. But, you also need the ability to optimize horizontally across digital distribution channels.
G: So what does this require on the publisher’s end? I imagine there’s got to be a substantial amount of infrastructure building for them.
R: The infrastructure is ours. SpotX has been monetizing digital audiences across all distribution platforms all the way back to 2007. clypd has been working with broadcasters, MVPDs and networks in managing their linear inventory. Ultimately it requires the ability to establish a singular campaign identifier that flows through both sets of pipes, a benchmark of how every single distribution channel is performing at a campaign level.
There will be broadcasters that have some very specific needs, and in that case there will be some bespoke solutions.
G: MagnaGlobal put out a report saying that 2015 4% and $2.5 billion of TV budgets are going to go through programmatic channels. By 2019 that’s going to be 17% and $10 billion. Pretty big increase, but what kind of hurdles are on that road?
R: If you look at a lot of the public discourse on programmatic, to this point it’s been dominated primarily by the buy side. Programmatic, from the broadcaster’s side, requires a lot more analysis, to determine whether or not a particular piece of inventory that a buyer wants is being offered at the appropriate rate. So it’s more than just a transaction. It is very much the economics and understanding what the value of every piece of inventory is against any given attribute.
G: Is programmatic TV going to kill the upfronts?
R: I think it probably enhances upfronts. From my perspective, I think the culture of TV remains the same. The person-to-person selling still happens. But the granularity of what has been agreed upon now defaults to a set of analytics tools. We’re turning intuition into empirical value. The sell itself doesn’t change. It’s just the execution of the media buy that gets a facelift.
G: So does that also preclude moving away from demographics and GRP-based metrics?
R: What we’ve built is currency-agnostic, measurement-agnostic. But more and more, we are seeing advertisers that have a tremendous amount of data that they want to start leveraging in the media buy. A good example is General Motors. General Motors has a vast amount of data that they call the Marketing Cube that forecasts geographically, psychographically, and demographically where the demand is going to be. And they’ve been collecting this data over a 20-year period. Now, they can apply these insights directly to the audience, and determine which segments of a broadcast audience or which distribution channels represent the greatest likelihood for engaging with that brand. Programmatic really opens up those doors for that type of transaction to happen.
G: So could you do enhanced targeting like you were just describing within a demographic segment?
R: You could. You may have inventory that has virtually no value from a GRP standpoint, but represents a tremendous concentration of the target you’re trying to reach. A perfect example is CNBC in the morning. If I’m trying to reach wealthy individuals who are concerned with what’s going on economically in the world, prime time for CNBC might be 6 a.m. on the East Coast, before the markets open. If you look at the ratings, the GRPs don’t substantiate that story. But from an audience segment standpoint, we do know that there are tremendous concentrations of wealthy individuals who are tuned in.
G: What are broadcasters’ current pain points? Is it operational challenges, or is it technological?
R: It’s a little bit of both. It’s getting very difficult for broadcasters to predict where and when audiences are going to tune in. At a macro level, the brand of a broadcaster is pretty good at maintaining its cumulative audience over time. But when you’ve got these multiple distribution channels expanding at an incredible clip, it gets very, very difficult to identify precisely where and when those audiences are going to consume that content. You have to have the ability to manage a campaign holistically. If I missed them live, prime time, last night, I might still be able to catch that exact target I was trying to reach on the train this morning when they’re streaming that content on their iPhone.
G: Coming from the digital side, in programmatic, I normally think of the buyer being DSPs, agency trading desks. Are those the same people that are coming through for programmatic television?
R: I think you’re going to see all forms of business coming through. DSPs can place that business. But advertisers can also use these tools to support the IO business that is still the predominant transactional framework for television. You have to be able to support that, simply because it’s going to take a number of years before everything is transacted programmatically.
G: It seems like there’s kind of a mix with advertisers. Certain ones are all about jumping into programmatic TV, but I imagine some are still holding back.
R: When you look back over the last five to 10 years, major brands have been constantly allocating a certain portion of the total spend to innovation. The brands that don’t have the luxury of strategic spend – they’re not going to be the ones that experiment. But they’re going to be the ones that learn from those advertisers who have experimented.
G: Can you give an example to illustrate the challenges broadcasters face in determining audience value across channels?
R: I was talking with a broadcaster in Australia a couple weeks ago. They’re supporting 27 distribution channels right now. It’s not just mobile — you’ve got iPhone, you’ve got Android, you’ve got Windows Phone. So a lot of these distribution channels have sub-channels. And we work with publishers to make sure they’re getting the appropriate monetization of each distribution channel. Television is just another distribution channel.
G: What’s the next hurdle for you, personally?
R: It’s looking down the track and seeing a hundred hurdles. It’s constantly envisioning these tools that broadcasters are going to need a year down the road, two years down the road, five years, 10 years, so that you’re never disadvantaged by buy-side systems that are leveraging data or insight in a way the broadcaster cannot.