Fox Takes Leap Into Programmatic

Fox Television Stations has inked deals with Google’s DoubleClick Ad Exchange and Vindico to monetize display and video impressions.

Under the agreement, Fox will be able to give advertisers specifically targeted sectors of the audience based on their requirements within its local TV online and mobile inventory. In turn, Fox’s impressions will be subject to competitive demand as advertisers battle for the ad spot.

“The fact that Fox is striking a deal with Google and Vindico demonstrates that it is willing to go to the open market. And more so, it’s a recognition that ad dollars for video and display are shifting to programmatic as opposed to platforms, which is a big deal,” says Mark Yackanich, chief executive (CEO) of video ad-tech company Genesis Media.

Programmatic buying, as this partnership is, is the use of automated software to purchase ads and is continuing to gain popularity in the TV industry. In the past few months, a growing number of TV outlets in the U.S., including NBC and ABC, have been experimenting with this automated method of ad buying and selling.

The video sector in particular has seen a huge surge in programmatic buying. During the second quarter of 2014, the amount of impressions purchased directly from publishers in the U.S. through programmatic channels was up 140 percent from the quarter prior. And the amount of video ads available for programmatic buying through open exchanges and supply-side platforms (SSP) increased 14 percent, according to TubeMogul, a video software platform.

“We’ve also seen a huge uptick in mobile video inventory, and expect both smartphones and tablets to receive increased viewership as cross-device video consumption continues to rise,” says Keith Eadie, TubeMogul’s chief marketing officer (CMO).

But while this technology is flourishing in the online ad world, it has been slower to catch on in TV.

“For many years, large broadcasting companies have perceived that programmatic ad buying is not being used effectively, and thus would undervalue their [ad] inventory,” says Yackanich.

Although recently several U.S. broadcasters have dipped their toes into the programmatic waters, few have scaled the technology. For example, ABC has not yet included commercial time on TV in its programmatic trial, and NBCUniversal has only made “a small amount” of its TV inventory available on automated exchanges.

And in the Fox-Google deal, Fox has not specified how much of its overall video and display ad sales will be driven by programmatic versus direct channels.

Yackanich, who previously worked for NBCUniversal, explains that programmatic has not yet been as fully embraced in TV as it has in online advertising because there are technical, cultural, and industry-specific structural challenges to address.

“Basically, the fundamental technology has to catch up with the ability to deliver the advertising in a programmatic fashion,” he says. “And on the organization side, the ecosystem [for TV ad buying and selling] has been built years over years based on the idea of ‘relationships,’ which I think is actually a cultural issue. So there’s no big incentive [for broadcasters] to put TV inventory into programmatic exchanges.”

He also points out that major broadcasting companies like FOX, NBC, and ABC have different ad operation and distribution models for the local side of their businesses and the cable and network side.

On the cable and network side, a large percentage of ad sales occur in an upfront cycle (for example, the annual TV Upfronts), which requires that both TV inventory and digital components be consumed in the upfront commitment. But in the local markets, in addition to some upfront commitments, much more ad inventory can be transacted on “a spot basis,” which means that brands and agencies may be able to secure a deal week-by-week, or month-by-month, as long as there are ad spots available.

And because of this distinction, while broadcasting companies may be able to test programmatic on the local side of their businesses, it could be difficult for them to enthusiastically integrate the automated systems into their overall strategy.

Looking forward, there’s no doubt that programmatic will keep its momentum, as Magna Global predicts that programmatic spend in the U.S. will reach approximately $17 billion in 2017, compared to $7.4 billion in 2013.

Nevertheless, it doesn’t seem that the TV ad industry will completely alter its existing advertising model and shift entirely to programmatic buying anytime soon, at least, not in the coming year.

“Some media companies have already started to use data to do better targeting. But we are still a relatively long way off from having significant programmatic efforts for television ad buying and selling,” Yackanich says.

Image via Shutterstock.