Television is facing a transformational moment in history, as viewers have more choices than ever before. Though still a fundamental pillar of marketing and a nearly $80 billion business, television has been dramatically changed by the rise of viewing devices and streaming options, and advertising buyers and sellers alike are struggling to keep up.

Based on our own data, as well as third-party data, we present three key findings:

- With overall television viewership declining each year, the rate of TV ad impression growth is misleading.

- Advertiser value per TV ad dollar is declining due to increased prices. As value declines, core ad spend appears to be slowing.

- Programmatic TV provides an important counter-weight to these trends and is poised to become a critical tool for buyers and sellers long-term.

The Fragmentation of Television Viewership

Despite a 46 percent increase in the number of television channels from 2008 to 2014, overall viewership has declined. Streaming services are providing consumers the content they want, whenever and wherever they want it. It’s clear that viewers are not watching less video, they’re just choosing to watch a more diverse range of programming across more channels and media. It’s not only getting harder for advertisers to pinpoint their audience, but those linear TV audiences are smaller.

TV Ad Impression Growth is Misleading

While “traditional” television viewership is declining, up until recently the industry had been reporting that TV advertising is healthy and well (the media stock meltdown of earlier this summer aside). Fewer viewers are watching TV, yet more are watching commercials. What exactly is going on?

Over the years, commercial breaks have gotten longer. Our research shows the nearly 30 seconds added to commercial breaks since 2011 is filled mainly by two 15-second advertisements, resulting in more spots in a 30-minute block. Ad impressions are not growing because viewership is growing, but because more commercials are squeezed into each ad break. Absent of impressions coming from the extra ad insertions, TV commercial impressions would be declining – consistent with the drop in television viewership.

What’s more, by analyzing the impact of TV airings on website activity on a second-by-second basis, we found that the deeper a spot is into a commercial break, the less effective it is. There’s a 15 percent drop in ad performance halfway into a commercial break, and a 23 percent drop at three quarters. Longer breaks mean lower average ad performance.

The TV Industry Reaches A Pivotal Moment in History

Advertiser value per TV ad dollar is declining due to increased prices, and as value declines, core ad spend is slowing. Standard Media Index reported an 8 percent decline in overall upfront spending for the 2014-2015 television season across broadcast networks and cable programmers.

Although marketers are budgeting less for television, media-agency Carat’s annual Advertising Expenditure Forecast predicts they plan on allocating more money this year than last to their holistic marketing efforts. Global ad spend is expected to reach $540 billion, which is 4.6 percent higher than that of 2014. Firms such as Magna Global and PriceWaterhouseCoopers project digital ad spend to match TV by 2019, evidencing digital advertising is fueling this growth. Forrester analyst Shar VanBoskirk suggests a big factor in digital’s rise comes from the fact that “marketers are able to prove digital works,” pointing to advances in measurement and attribution. Unless both TV buyers and sellers work to address these gaps, the shift of television dollars to digital will only continue to accelerate.

Programmatic TV in Action

In television, programmatic revolves around the automation of data-driven, audience-based advertising transactions, whereas in digital, programmatic typically includes the elements of real-time buying.

While the automation of linear TV is a small percentage of today’s market (4 percent of TV budgets), programmatic TV stands to capture 17 percent ($10 billion) the market by 2019, according to Magna Global.

Already, 24 percent of agencies and 43 percent of brands claim they are using some form of automation or data-driven process to inform TV buys, and 60 percent of brands are poised to apply programmatic techniques to broadcast TV by 2016. Accelerating the foray into programmatic TV, 57 percent of brands cite advanced targeting as the top advantage, followed by 39 percent who believe timely reporting is the top draw.

It’s not just the buy-side that has begun experimenting either. NBCUniversal-Comcast, for example, has started using data aggregated from its cable boxes in 20 million homes to inform its advertising and programming decisions.

Nevertheless, due to the US television industry’s expansive market and old infrastructure, it will take some time for programmatic TV to be the new industry standard.

Summary

Television remains one of the most powerful advertising mediums on the planet, and retains an impressive viewing audience. In an age where every time-consuming manual process is becoming automated, however, TV’s advertising inefficiencies are being exposed.

Fortunately, programmatic advertising in the linear TV world can help buyers better utilize their television spend, reaching the exact audience that matters, while sellers can better retain and assure advertisers of the value of their viewers. The transition to an automated future is inevitable.

(Note, “Finding the Needle in the Haystack: A Programmatic TV Primer” is available for download here.)