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Ad Tech Spotlight: Programmatic TV push to receive M&A boost

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Ad Tech Spotlight: Programmatic TV push to receive M&A boost

This is the first installment of a multipart series on developments in the advertising technology market. Part 2, about private equity interest in ad tech, will be published Aug. 15, part 3, covering Facebook-Google's ad tech duopoly, will be made available Aug. 16 and the final part, discussing fraud within the sector, will be published Aug. 17.

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The TV industry has been slow to adopt programmatic advertising. However, a renewed push toward the type of precision ad targeting that is standard among digital advertisers could signal a wave of fresh investment and M&A in the market, industry observers have said.

The first signs of an industrywide move to ad targeting emerged in March this year when media giants Viacom Inc., 21st Century Fox Inc.-owned Fox Networks Group and Time Warner Inc.'s Turner teamed up to launch OpenAP, an open-platform for audience targeting and measurement.

Not only did the announcement highlight the ongoing combination between TV's wide reach with the targeting smarts of its digital cousins – web, social and mobile – but it also pointed to a slow shift from the broad demographic data historically relied on by advertisers.

As a result, there has been a recent proliferation in data and technology solutions for television, according to JC Uva, managing director at New York-based strategic advisory firm MediaLink.

"It's an important area to watch because the TV market is still the biggest advertising market in the U.S. and globally," Uva said in an interview. "While ad fraud is an issue, there is still big appetite to understand how television is measured," he added.

The nascent state of the market could attract substantial M&A activity from investors seeking "untapped" areas, Uva explained.

For the most part, recent M&A interest has focused on video ad targeting solutions. For instance, last year Comcast Corp. acquired StickyAds.tv, a French video ad-tech startup, while U.K. pay TV company Sky plc invested $10 million in programmatic software company DataXu.

Meanwhile, the telecoms industry has also been increasingly active in the ad-tech market, with Altice NV and Singtel both announcing deals for a combined $618 million this year.

The broadening range of M&A buyers in the marketplace means the advertising and marketing tech industries are undergoing "unprecedented" level of consolidation, explained Simon Nicholls, London-based partner at tech investment bank GP Bullhound.

"It's very dynamic and evolving quickly in terms of the opportunity and technology… and that's going to continue to drive a lot of M&A," he added.

This has even larger implications for TV ad sales.

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One of the key benefits of adopting programmatic ad buying in the TV ecosystem is the ability to transact media on smaller budgets, bringing a wealth of new opportunities from the digital arena, according to Robert Brill, founder and CEO of Los Angeles-based marketing firm BrillMedia.co.

As a result, the TV space is "definitely" on the radar of ad-tech startups vying to bring television to "digital buyers' fingertips," he added.

One such startup is Croatia and Vienna-based TV advertising big data firm AdScanner.

The company's CEO and co-founder Marin Curkovic said that despite naysayers' message of doom, TV is significantly growing in terms of ad dollars being spent. However, he believes ad measurement strategies would be a boost to the industry.

"People know that TV brings a lot of reach but they don't optimize for it as best as they could," Curkovic argued.

A brand needs between 80%-90% reach for a campaign to deliver, with roughly 60%-70% of that reach coming from TV, he explained. However, the lack of granular targeting in TV means getting that extra 5% remains a challenge.

By analyzing live data to examine who sees an ad first or where ads are placed versus the competition, advertisers can more easily aim for that incremental reach in television, Curkovic noted.

However, despite some strong gains in the targeted TV ad space, it is still early days for the budding market.

"There are lot of entrenched [players] that are resisting the transformation so it's taking some time to change," Matthew Nally, founder and managing partner at New York-based programmatic consulting firm Labmatik, said in an interview.

While programmatic ads represent a huge bulk of all online ad transactions, targeted TV spending is estimated to account for just 1.7% of total TV ad spend in the U.S. this year, growing to 4% by 2019, according to research firm eMarketer.

Nonetheless, observers believe the faster-than-expected growth in video content, combined with the trend in cord-cutting and the shift to mobile, means programmatic solutions in TV will eventually take off.

"Video… regardless of format, is set to undergo a very significant transformation and is the most deeply entrenched and largest piece of the overall piece of the pie," Nally concluded.