Programmatic Trading Emerging In Linear TV Advertising

The following post summarizes a recent report from our Media & Communications (SNL Kagan) offering. For further information on the report or our research, please request a call.

The use of programmatic trading in linear TV advertising is only a few years old, but there are signs of increased activity. Linear TV suppliers conducted more vendor evaluations and testing in the latter half of 2015, following advertiser tests of the software on the demand side, including ad buys for the Super Bowl in 2015. Testing is ongoing in 2016, and some suppliers, like DISH Network, are moving beyond the trial phase into a full-blown deployment.

Programmatic trading of linear TV advertising allows the buying/selling of ad inventory based on data that better segments the audience. It also automates the transactions and reporting, eliminating previously necessary manual processes.

To illustrate the potential for the nascent category, we have modeled three separate programmatic growth curves for each segment. We forecast that the percentage of linear TV advertising that will be traded programmatically will grow from 0.3% in 2015 to 10.7% in 2020 in the moderate scenario, with revenue increasing from $232 million to $9.4 billion. Alternately, a more conservative view sees the programmatic percentage at 5.8% in 2020, while an aggressive stance would see programmatic reach 15.1%.

While the buzz around programmatic advertising in the linear TV market has been growing in the last six months, the market is just getting started and will take a long time to develop. There are many barriers, including education, technology integration and a resistance to change what is currently working. If early testing and deployments prove that programmatic trading increases ad revenue or reduces the cost of selling, programmatic trading will move faster. But if programmatic trading becomes necessary to avoid losing revenue, the market will move more quickly.