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TV media buying market

Internet ad tech companies have been anxious to bring their products to the TV media buying market. Specifically, they are interested in entering the linear (non-addressable) TV segment that comprises the largest market niche in the US and worldwide.

This trend poses significant threats to the TV media selling industry and TV companies in particular. Read more below on these threats, challenges TV companies will face, and the window of opportunity that can be leveraged by the TV market players.

THREAT GROUPS:

Revenue

Audience buying vs GRP

Currently, advertisers have to use GRP as the currency of they TV media buy deals. However, with the advent of the very precise targeting options of the Internet ad tech, advertisers are pushing the TV towards audience-based buying.

Most notably, media buyers are now looking to buy subsets of the TV programs audience which will result in the undersold inventory and a decline in revenue.

RTB vs Future Commitment

The TV companies usually work on the future commitment basis. That is, during the beginning of a new period the media sell houses are working on securing advertising budgets that will be spent during the period.

With the real-time (RTB) bidding model, TV companies will no longer have a predictable revenue flow because all media buy deals will be on-the-spot.

Business model

Internet providers vs Content providers story

If you look at the Internet provider companies you’ll notice they are very much like broadcast or cable TV companies. That is, both types own infrastructure that connects end users with the content. However, on the Internet it is content providers who generate much more revenue than the end users pay for using the pipes to access such content. In other words, the Internet providers are dumb pipes that are leveraged by the content providers to monetize the end users in various ways, including advertising.

In contrast, these days in the TV industry companies both own the infrastructure with the end user base, and control the advertising spend. However, Internet ad tech is poised to replace this model and convert TV companies back into the dumb pipes.

Smart TVs

Smart TV manufacturers are biting the pie from a different direction. They produce devices that the end users use to consume the content. With the ability to gather viewer behaviour and influence it, they are in position to start selling ad space themselves.

Data ownership

Data-centric Business

Internet ad tech companies build their business around data. They track online user behaviour across different web-sites via cookies, process that data, and use it to build mathematical models that can weigh the attractiveness of a particular user towards a specific ad. In other words, these models are used in the RTB auctions to determine the price an advertiser is willing to pay to show an ad.

Ad tech companies like TubeMogul are striving to enter the broadcast (non-addressable) TV market, and they want to utilize their existing know-how with that. The know-how is based on data. The data ownership will change if they manage to do that.

Vendor Lock-in Problem

There are ERP software vendors that license their products to TV companies. With the rest of the ad tech industry, they are willing to jump on the programmatic buying wagon. However, they seem to not to play nice by restricting their clients in the ways the data can be accessed. Moreover, since the ERP software supports the entire TV company business, it’s impractical and expensive to change for something less restrictive

While this could have been acceptable on the past, nowadays TV companies need to be able to utilize their data on their own because it is more effective and more right: the property owner controls how it should be used, not the storage facility it is in.

WHERE IS THE MARKET GOING TO?

Media buyers’ ultimate goal is to be able to execute cross-platform cross-device marketing campaigns in a unified fashion. Currently, only Internet ad tech companies are in position to satisfy this demand. However, their business model is far from what TV companies are used to.

 

 

DATA-CENTRIC

Ad tech is built around processing third-party data:
– Data is captured through the third-party infrastructure
– Data is leveraged to influence the algorithmic buying decisions
– Data from one source is used to benefit from other sources

OPAQUE

Ad tech makes publishers give up their users’ behavioural data:
– User’s behavior is tracked across the web in order to be able to provide better targeting options for advertisers
– Advertisers have low or no control over where their ads will be shown arrow

HI-TECH

Internet ad tech is on the bleeding edge of the technology:
– Big Data
– Extremely high load

Sergey

Sergey Lobko-Lobanovsky

Chief Executive Officer

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