Understanding Programmatic TV - Part 3: Markets

Agencies, network families, and cable operators generally seek programmatic solutions because they believe programmatic implies competitive markets. The primary role of markets is to bring buyers and sellers together, to determine the price of a transaction. That said, if you survey the current crop of technologies branded as programmatic solutions for linear television, you would find they use automation as a cover while implying a competitive market.

In the first two parts of our series, we explored the process and automation of programmatic linear TV. In the third part of our series we discuss how real markets can be supported with the automation programmatic enables.

The primary obstacle to creating competitive markets for linear TV is that buyers' demand is defined in reach and frequency while sellers' supply is defined in spots. Moreover, the management of 'rate cards',which are predetermined prices, perpetuates the illusion of a market.  If markets bring buyers and sellers together to determine the price of a transaction, but all the deals are already priced, then what is the market doing?

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If prices are pre-negotiated before they get to the "market" then anything called programmatic is only performing audience optimization on existing deals. The whole point of using markets is to strike the deal in a competitive environment that is good for both buyers and sellers.

There are currently four types of programmatic TV solutions in the market:

Buy-side optimization: allocates spend across media products offered by seller(s).
Sell-side optimization: calculates least amount of inventory to use for each deal.
Deal communications: platforms for people to send deals to other people.
Exchanges: allows sellers to offer and buyers to bid with automated order matching.

Buyers and sellers want to explore supply and demand in the market. If buyers and sellers can see the other side of their deal, set their prices, search supply, and demand, then you have a market. A black box that stores rate cards from sellers or sends buy orders to individual sellers is not a market.

To enable real markets, sellers need to package inventory, price it, and keep orders in sync with inventory. That functionality is missing in all but one of the four types of programmatic solutions. On our platform, the inventory, catalog, and order management tools are all woven together.

Markets for linear TV already work this way, there is much more time to buy and sell the media. A vast majority of TV impressions are not served or filled in real time. eMarketer estimates that addressable TV will reach 4% of overall spend in 2019.  For linear, buyers and sellers need a different market. If the seller has no bids, they can wait. If a buyer sees no inventory they can leave a bid. This trading only works in two-sided markets.

TV media is a negotiated transaction, there is no negotiation in rate card driven systems. In a negotiated environment, each side has the power to change the price at which they are willing to do the deal and the amount they are willing to buy or sell. In two-sided market transactions prices, are set by both sides. Neither side has to do the deal right now. Negotiation is all about dynamic systems. The solution for programmatic linear TV is a two-sided market. Here's why:

Matches bids and asks, the market doesn't determine a deal's price.
Buy and sell orders stay open until matched or canceled.
Buyers can search for supply and Sellers can search for demand.
Depth of supply and demand liquidity can be measured.
Supply competes for demand and demand competes for supply, in the same market.
Market data is deterministic.

Most other technology providers are really not programmatic markets. As an industry we need to have an honest conversation about technology for linear TV.