How Online Ad Technology is Set to Disrupt the TV Industry: An Introduction

Cross Channel Optimisation

If you were to ask most people in the TV industry how Google is likely to disrupt their business model, most would in all likelihood point to YouTube. After all, YouTube looks a little like TV, has channels, runs ads, and Google pays people for content to show on there. But ask them what Google are doing with Doubleclick Digital Marketing or the Doubleclick Ad Exchange is, and the chances are most would — through no fault of their own  — look blankly at you. As would many people in digital marketing it has to be said.

Yet Google’s Doublelick Digital Marketing (formerly known as DFA) and the Doubleclick Ad Exchange are going have just as big an impact on the TV industry as YouTube ever will; as will the very similar advertising technology stacks being developed by Google’s competitors like Adobe, Appnexus, DG/Mediamind and Microsoft (there are many others but too many to mention here).

To put it bluntly, if you’re in TV and don’t understand the trends in online ad tech, you’re not actually in a position to understand how your industry is set to be disrupted by the Internet. Because the ad tech industry will disrupt your business model just as much – if not more – as things like YouTube, the second screen and OTT services.

Worth noting at this point that if you’re in TV or digital advertising and already understand RTB, programmatic buying and cross-channel optimisation, this article probably isn’t for you. It’s designed to be a primer for people in TV who wouldn’t necessarily have been following developments in online ad tech.

There are different ways of explaining the developments in ad tech. You may have heard of programmatic buying, retargeting, RTB, DSPs, SSPs and ad exchanges. Or you might not have. But we’re not going to get into that here as those technologies are just the plumbing. The important thing to understand first is what these technologies are being built to do.

Let’s start with the ‘stacks’ we mentioned earlier. These ‘stacks’ – called stacks because they’re the result of different pieces of ad technology (an ad server and an analytics tool, for example) being stacked on top of one another – do many things. Each is unique and has its own strengths and weaknesses. The most common and most basic functions are the ability to buy media, to actually deliver the ads and to analyse performance across the various digital channels  (search, social, video, display and mobile for example). At a more advanced level you can also use data to inform your buying decisions or to find users again online, so you show the best possible ad to the right user.

As well as simplifying the act of media buying, these stacks help with ‘cross-channel optimisation’, which sounds a lot more complicated than it actually is. All it refers to is the process through which an advertiser works out where the best place is to spend their money in order to get the best possible ROI.

The idea is to make advertising more effective and to reduce waste. You may have heard the John Wanamaker quote that gets used at every other advertising event, “Half the money I spend on advertising is wasted; the trouble is, I don’t know which half”. Well, the goal of digital advertising is to try and work out which half is which.

Now, put yourself in the shoes (and hipster glasses, perhaps) of someone buying digital media for an advertiser. You’re in charge of all digital advertising for ACME Enterprises, so you’re responsible for buying: social, mobile, display, search and video.

You have a budget of £100k for Month B, so you decide to look back at how your advertising in Month A performed. To do that, you could do two things. You could look at separate reports for each activity to try and work out what’s delivering for you. But comparing all that data yourself is likely to be a difficult task if your spend is spread around different channels and between different publishers within each channel.

The alternative would be a piece of software that makes that process easier for you; something that allows you to compare the results of one media buy with another so you can work out where what the sweet spot is for your advertising spend. Ideally, you want to work out what blend of advertising you need to produce the greatest return on your spend. So, for example, you might want discover that the way to deliver optimal results is to show a user two video ads, three display ads, one mobile and one social, which you know increases the likelihood of someone performing a search and purchasing the product you were advertising.

That consumer journey from ad exposure to sale could take decades or it could take minutes, but either way it’s in the advertiser’s interest to try and understand how the consumer went from knowing nothing about the product to handing over money for it.

So you look back at what happened in Month A, and you see you spent £30k on video, £10k on social, £10k on mobile, £20k on display and £30k on search, which delivered Sales Result of 200 and a Brand Result of 300. But your target for Month B is a Sales Result of 300 and a Brand Result of 400, so you want to allocate your spend more efficiently in Month B to get there.

To find out what happened in Month A, you use your analytics tools to look at what worked, and you discover that social didn’t do too much for you (sorry social), but video worked wonderfully, as it always, always does. So in Month B you spend £35k on video and just £5k on search and you spend the same on the other channels, which you hope will help you achieve your business goals of a Sales Result of 300 and a Brand Result of 400.

Now this is an incredibly simplistic, stripped down example of what digital advertising is doing/working towards, but it’s why various companies (like Google, Adobe, Microsoft, Yahoo! et al) have been investing billions in technology that can help advertisers make these decisions more effectively.

However, the ultimate goal is to be able to go even deeper, which we can already do at least to some degree today, so within that analysis of budget allocation, you’re not just looking at how the different channels performed but what your individual users did. So, for example, might find that Firefox users in London who clicked on a display ad on Site X are more likely to buy if they’re shown a video ad early in the morning on a premium site.

So how is this relevant to TV?

Put simply, this is the advertising juggernaut heading toward the TV industry. The advertisers ability and desire to optimise advertising spend and track user behaviour across different channels is going to shake up the TV industry every bit as much as things like mobile/tablet/connected TV usage, the second screen, or the rise of YouTube and OTT services.

The reason everyone is so excited about data isn’t just because it allows you to show an ad for a red hatchback to guy who’s in the market for a red hatchback, as incredible as that is. It’s also about being able to optimise your advertising spend so you get that guy interested in red hatchbacks in the first place. Or to show his wife a display ad that encourages her to influence his decision when choosing a car. Or to reach him in the best possible environment and via the most effective channel. And if you don’t make the sale, at the very least you’ll have acquired insights that will enable you to work out how to do better next time around.

As a broadcaster, you might prefer to stay out of this system and choose to stick with old school broadcast technologies, which will in all likelihood evolve and improve beyond what they are now. But in doing so, it’s important to realise you’re giving two fingers to your advertisers who will want to buy your media via the digital buying platforms they’re using. Because all of your advertisers spend money on other media channels beyond TV, they will want to optimise their spend accordingly, and will require the data and analytics tools to do so — so by opting out of the digital advertising ‘ecosystem’, you’re making life more difficult and unnecessarily wasteful for them.

Now, there’s a chance you might be able to get away with this for a while. If you have premium content that delivers the kind of scale, reach and context that’s unattainable elsewhere, you’ll probably be able to cling on for a few more years. But as video grows and more content is delivered via mobile, tablets and connected TVs, you’re going to be quickly outflanked by competitors who can give advertisers the scale/reach/context, as well as the opportunities for data integration (for better targeting) and the kind of reporting that allows them to allocate their spend more efficiently.

This process has already begun and is one of the key reasons online video is growing as quickly as it is. Google gets this, as do Microsoft, Yahoo! and Microsoft, which is why they’ve all invested far more in ad technology platforms than they have in content.

The media industry isn’t just a competition for eyeballs and demographics any more, but it’s about being able to predict and analyse what’s going on in the brain behind those eyeballs in ways that were never achievable until now, and it’s going to evolve ways that we can’t even begin to imagine today.

But to become part of this system, where cross-channel optimisation and data-driven advertising is possible, you can’t afford to stick with the traditional broadcast model, because in the buyer’s mind that means you’re out of the loop. You’re off the grid. You’re unaccountable. And regardless of how honest you are with your advertisers, in this new age of digital transparency and accountability, you’re going to be treated with suspicion and be regarded as being akin to the ‘black box’ solutions found online, where the advertiser doesn’t know where their ads are running. Panel, schmanel.

So if you’re a broadcaster who gets it, but haven’t been as proactive as you would have liked, what can you do?  Well there are dozens of things, but most would fall within the following over-arching recommendations, some of which you may have well been doing already:

  • Commit to delivering all of your content over IP, but by all means keep a foot in the traditional broadcast world for as long as it’s worth your while to do so.
  • Invest in data-savvy staff and the technologies you’ll require to deliver optimal results for your advertisers.
  • Learn more about your audiences and plan how you can monetise them effectively using a variety of data sources.
  • Educate your advertisers about what you’re doing and explain why they should be paying a premium for more intelligent advertising.
  • Stand firm on budget minimums and don’t allow advertisers an excessive amount of room to cherry-pick inventory and who they want to target their ads to. Data should enhance the value of your media and your net revenue, not diminish it.
  • Learn the lingo and don’t be intimidated by the digital acronyms. RTB, DSPs and ad exchanges are easy to understand. If someone knows you’re new to this area and can’t explain the basics to you in simple terms, chances are you shouldn’t be working with them.
  • Keep a close eye on the privacy debate. Regulators are still working out how to balance the needs of advertisers with the privacy rights of consumers.
  • Don’t lose sight of the value of the basics. Quality content that is delivered over multiple platforms and offers a great user experience aren’t going anywhere.


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