Why DSP Technology Isn’t the Future of TV Advertising

Table of Contents

  1. Introduction
  2. The Evolution of DSP in Digital Advertising
  3. Direct Connections Between Brands and Publishers
  4. High Costs and Limited Reach
  5. The Frailty of DSPs in Preventing Fraud
  6. Alternatives and Future Strategies
  7. Conclusion
  8. FAQs

Introduction

Did you know that despite the digital revolution, traditional TV still captures more than half of all viewing time? In an era where digital advertising has proliferated across various channels, the advent of programmatic and Demand-Side Platforms (DSPs) has significantly transformed how advertisers connect with their audiences. However, when it comes to the fragmented world of TV advertising, DSPs may not be the ultimate solution.

This blog post delves into why DSP technology isn’t poised to dominate the future of TV advertising. While DSPs offer streamlined solutions for online ad campaigns, they fall short in several critical areas concerning TV. We’ll explore these shortcomings and examine why direct connections between brands and publishers remain essential in the TV advertising landscape. You’ll also gain insights into how high costs, limited reach, and fraud risks make DSPs less attractive for TV spending. Lastly, we’ll highlight alternative tools and strategies for efficient TV advertising.

The Evolution of DSP in Digital Advertising

What Are DSPs?

Demand-Side Platforms (DSPs) are automated systems that allow advertisers to purchase digital ad inventory, managing campaigns efficiently across multiple channels. They bring several advantages to the table, such as real-time bidding and audience targeting, which are instrumental for executing impactful online campaigns. With DSPs, brands can target their desired audience segments across various digital platforms, subsequently bidding for and placing ads in real time.

DSPs and TV: A Mismatch?

Though highly effective for digital advertising, DSPs have not seamlessly transitioned into the TV advertising realm. Digital platforms are diverse and fragmented, necessitating a tool like DSP, which targets various channels simultaneously. On the other hand, even with the rise of streaming platforms and FAST (Free Ad-Supported Streaming TV) channels, TV still remains a more concentrated environment. Traditional TV advertising maintains a stronghold on direct purchasing from networks and publishers.

Direct Connections Between Brands and Publishers

The Value of Direct Relationships

Historically, TV advertising has thrived on direct connections between brands and publishers. This approach is especially prevalent among major streaming players who prefer to sell their inventory directly. Why is this important? Direct transactions foster deeper relationships, enabling collaborative discussions on budgets, program integrations, and data sharing—all of which lead to more transparent and effective campaigns.

Workflow Efficiencies

Another crucial benefit of maintaining direct relationships lies in workflow optimization. Unlike the convoluted DSP model, where various intermediaries are involved, direct relationships streamline processes. With fewer layers of separation, brands and publishers can submit Insertion Orders (IOs) straightforwardly, eliminating unnecessary complexities and costs.

High Costs and Limited Reach

The Hidden Costs of DSPs

One of the primary drawbacks of using DSPs for TV advertising is the high fee structure. On average, DSPs charge a fee ranging from 15% to 30%, while Supply-Side Platforms (SSPs) tack on an additional 10% to 20%. This means that almost half of the advertising budget could be spent on fees rather than actual media placement. An even higher percentage is incurred if managed services or ad-serving fees are used, which can elevate costs to unsustainable levels for many brands.

Reach Limitations

DSPs are inherently designed for digital platforms, limiting their reach when it comes to linear TV advertising. Despite a noticeable decline, linear TV still commands a significant audience share and provides affordable Cost Per Mille (CPM) rates, making it an efficient medium for advertisers. Certain events with broad appeal, such as the Super Bowl and the Oscars, primarily draw audiences through linear TV, highlighting the necessity for advertisers to blend linear, cable, streaming, and online video strategies—something DSPs are not fully equipped to handle.

The Frailty of DSPs in Preventing Fraud

Transparency Issues

The automated nature of DSPs adds multiple layers between the advertisers and publishers, often resulting in transparency issues. This lack of clarity makes it easier for fraudulent actors to exploit the system, charging advertisers for ads that do not reach real viewers. While some level of fraud is tolerated in programmatic digital advertising, the high CPM rates in TV advertising leave little room for such inefficiencies.

Reducing Fraud with Direct Deals

By contrast, direct transactions between publishers and brands significantly mitigate the risk of fraud. In these cases, both parties can ensure that ads reach their intended audience, thus maintaining the integrity and value of TV advertising.

Alternatives and Future Strategies

Embracing Convergent TV

As the TV landscape evolves, advertisers are increasingly focusing on convergent TV strategies—combining linear, streaming, and digital video into a cohesive advertising approach. This ensures comprehensive audience reach and offers unified analytics for better optimization. Advertisers aiming for success are thus turning to TV-specific tools and platforms that allow for such integration without the limitations imposed by DSPs.

Utilizing TV-Specific Tools

Companies like Tatari are setting the benchmark for modern TV advertising tools. These platforms are built with the specific needs of TV advertisers in mind, offering features such as real-time optimization and comprehensive analytics across multiple channels. Leveraging these tools can help brands meet their advertising goals more effectively than relying on DSPs.

Conclusion

While DSP technology has revolutionized digital advertising, its application in TV advertising remains inadequate due to high costs, limited reach, and fraud concerns. The entrenched nature of direct relationships between brands and publishers in the TV industry adds another layer of complexity that DSPs haven’t managed to navigate successfully.

Instead of fully transitioning to DSPs, advertisers should consider embracing a convergent TV strategy that combines linear, streaming, and digital video efforts. Utilizing TV-specific tools that cater to the unique demands of TV advertising can provide more effective and transparent results. By doing so, they can navigate the intricate landscape of modern TV advertising with greater efficiency and success.

FAQs

1. What are DSPs, and why are they important for digital advertising?

DSPs (Demand-Side Platforms) are automated systems that allow advertisers to purchase digital ad inventory on multiple platforms, offering benefits like real-time bidding and audience targeting.

2. Why do DSPs fall short in TV advertising?

DSPs involve high fees and lack access to linear TV inventory, limiting their reach. Additionally, they introduce transparency issues that can lead to increased fraud.

3. What are the benefits of direct connections between brands and publishers in TV advertising?

Direct relationships facilitate better collaboration, transparency, and efficiency, enabling parties to discuss budgets and program integrations directly without intermediary layers.

4. How does DSP technology contribute to fraud in advertising?

The multiple layers involved in programmatic ad buying through DSPs can hide fraudulent activities, making it easier for bad actors to charge advertisers for ads that aren't viewed by real people.

5. What strategies can advertisers use as alternatives to DSPs for TV advertising?

Advertisers can focus on convergent TV strategies that combine linear, streaming, and digital video. Utilizing specialized TV advertising tools like Tatari can also provide more effective results.