The Game Changer: How Programmatic Video is Reshaping Advertising

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At a Publisher Forum several years ago, I distinctly remember the collective groan emitted when the topic of programmatic and video came up.

The last thing anyone wanted to do was put their incredibly valuable video inventory into an exchange. Many publishers were sold out and/or commanding top CPMs for video. Video is also more complicated as you not only have browser issues but player issues. At the time, the idea that buyers would provide video ads with the right specifications through an automated system seemed far-fetched.

I agreed, chiming in, “Video is not display.” 

I stand by my statement, but over time the logic behind it has certainly proven to be wrong. Programmatic has grown up to be more than RTB, and programmatic video is more than a flavor of display advertising automation. In fact, eMarketer forecasts that US programmatic video ads will grab 40% of digital video ad spending in 2016, or $3.84 billion. According to Zenith, programmatic video buying gives “advertisers more control and better value.” Video is not display, but not for the reasons I originally thought.

But the growth of programmatic video isn’t just programmatic concepts being applied to video advertising. It is its own animal and one that needs to be watched as it progresses. Programmatic video may be a game changer for an industry funded more for its potential than its delivery to date. 

That being said, many publishers are still sold out of their video inventory and commanding top dollar. The supply/demand ratio isn’t like display and therefore the move to programmatic video is being done cautiously with an eye to keeping CPMs high and sales relationships intact.

Because of this, programmatic video is evolving in different ways than display. Primarily, it’s not part of a remnant strategy.

One of These Things Is Not Like the Other

For many publishers, programmatic video isn’t about the auction. It’s simply allowing buyers to access inventory through the programmatic systems they have developed. Broadcast companies like A&E only allow buyers to buy video through private marketplaces and don’t put their inventory on the open exchange. Others will let their inventory go to the exchange but buyers will find that the inventory they wanted isn’t available by the time they put in their bids. 

This has created a distinct difference between the video and display marketplaces. Unlike most display inventory, premium video inventory isn’t dumped into the exchange for buyers to pick through. Instead the programmatic channel becomes a way to guarantee that top-paying buyers have first shot at inventory and pay CPMs that both parties are happy with.

In fact, some buyers and sellers want first-bid auctions to work for video instead of the standard second bid auction. That’s because if a buyer wants that impression, they want to grab it without further negotiation at their original bid price. 

Video is also where you’ll hear the most discussion around programmatic guarantees which forego just negotiating a CPM, but buyers committing to an amount of inventory they will take. This not only speaks to the value of the video inventory but how much value video loses when it’s passed back. The process of buyers evaluating impressions and cherry-picking only the ones they want creates latency (which is deadly in video) and depending on the process, strips the impression of a lot of the data that made it valuable. 

“Cherry-picking ruins the tree,” says Chris Pirrone, General Manager at USA Today Sports Media Group. The supply constraints in video (versus display) make it more appealing to lock down video inventory up front with a guarantee. 

Click Down for What?

Video advertising has always been more about branding than clicks. Clicking on video is how we pause video, not navigate to more content, advertising-related or not. The metrics of success therefore are more akin to broadcast. 

Advertisers want their ads seen. They want viewability and they want brand lift. Transacting on viewability will create even more scarcity of video inventory, but Bill Day, CEO of Tremor Video, believes this will only benefit quality publishers in the long run. 

“Programmatic is just a tactic; branding is the strategy,” he says. “Viewability is an essential part of that strategy, not just to measure but to help optimize.” 

Optimizing branding campaigns further moves the industry away from the click and into the interesting opportunities of brand lift and engagement. Programmatic video will help lead that charge.

Follow the Shift

I’m a big believer that we will see a shift in ad spend moving primarily from television to digital as our case for those dollars become stronger and we become easier to work with. But those dollars will not be distributed evenly – the broadcasters will be looking to keep those shifting budgets coming their way.

Not everything is in place for that shift to happen today. In long form video, ads are served in “pods”. One publisher pointed out that category protection – making sure competitive ads don’t run in the same pod – still needs improvement. Many of the steps toward automation are still quite manual.

However, as the buyers continue their move to all things programmatic, programmatic video becomes one of the most important areas to watch, not just for broadcasters but everyone in digital advertising. In fact, you could say that in some ways video and display are very much alike in that the convergence of digital and linear could play a big part in how they both evolve in the future.

I think it’s pretty clear that video is at the forefront of that evolution. Programmatic video will lay the groundwork for programmatic TV and that could change everything.