Programmatic and addressable TV

As linear TV viewing decreases, and the Internet provides increasingly stiff competition for both screen time and ad revenues, television is reinventing itself to be able to offer advertisers similar advantages to those of its chief rival. Targeted advertising could well enable TV to go back to the good old days of steadily increasing ad revenue.

Different concepts

A concept derived from the Internet, programmatic TV encompasses three central realities:

  • Linear programmatic TV: delivers the same commercials to all viewers watching the same TV show, but allows advertisers to target those programmes whose viewers most closely match their ideal target consumer.
  • Addressable TV: seeks to deliver different commercials tailored to each household during the same linear TV programme broadcast.
  • Connected TV: ads targeted to each household are inserted into non-linear (especially catch-up TV) content.

The central role of the STB and data analysis

Although still just a fledgling in most every country, programmatic TV is growing fast in the United States. It is also making real strides in the UK, Australia and Germany. Its expansion relies largely on the set-top boxes (STBs) and platforms deployed by cable companies, satellite operators and telcos who see it as an opportunity to gain a foothold in the revenue value chain. TV networks are more reticent, worried that some of their valuable ad revenues will be lost to third parties, and especially concerned that global heavyweights like Google or Facebook will secure a major role in collecting and analysing consumer data.

A number of conditions need to be met for the market to take off

There are several factors that will influence the development of programmatic TV:

  • The size of the addressable market, which depends on pay-TV (hence STB) penetration rates, as well as the adoption levels for the different devices that allow viewers to connect to their TV;
  • Stakeholders’ ability to agree on technological standards and new audience measurement tools;
  • Possible regulatory developments;
  • Stakeholders’ ability to come up with new business models that are adapted to the new relationship between market players;
  • New degrees of required transparency on the data being used; • Advertisers’ real requirements in terms of targeted TV advertising: mass advertising satisfies certain specific needs that would be more expensive to achieve with targeted advertising.

According to IDATE DigiWorld, the global programmatic TV market will stand at 19.1 billion EUR in 2021, or almost nine times its size in 2017. The United States will account for close to three quarters of this market.

US the prime beneficiary of rapid growth
The value chain's new intermediaries
Programmatic TV market organisation and players
Source: IDATE DigiWorld in ``Programmatic TV to addressable TV``