Introduction

Imagine launching a TV ad campaign targeting millions, only to discover a significant chunk of your budget evaporates before even reaching potential viewers. This scenario paints a stark picture of the current landscape in TV advertising influenced by Demand Side Platform (DSP) technology. Despite its irreplaceable role in digital advertising, DSP technology has hit several roadblocks when trying to make the same impact in TV advertising. The friction between the traditional direct sales model and DSP-driven programmatic strategies is evident. This blog post aims to delve into the reasons DSP technology may never fully integrate into the future of TV advertising and what alternatives advertisers can explore.

The Direct Sales Model: A Robust Tradition in TV Advertising

Historically, TV advertising has been a domain where direct interactions between brands and networks or publishers have fostered efficient collaborations. These direct connections have laid down a framework devoid of intermediaries, which contrasts starkly with the fragmented nature of digital advertising that DSPs cater to. Despite the rise of streaming and FAST channels, TV advertising’s landscape remains relatively concentrated compared to online ecosystems. Even in its evolved state, TV advertising retains a model where large networks sell their ad inventory directly.

Brands and publishers often prefer maintaining these direct connections for numerous reasons:

Enhanced Relationships: Direct interactions lead to stronger relationships where brands and publishers can collaboratively plan budgets, enhance data exchange, and explore various integration opportunities.
Transparency: The absence of intermediaries like DSPs ensures transparency in transactions, reducing concerns about hidden fees and potential fraud.
Customized Solutions: Direct dealings often allow for more customized, fine-tuned advertising solutions that align closely with individual campaign goals.

The Financial Drain of Programmatic Costs

One of the most significant barriers to the widespread adoption of DSPs in TV is the high cost associated with programmatic advertising. The fee structure within DSP platforms often leaves a substantial dent in advertising budgets. For instance, DSPs typically charge a 15-30% fee on ad spend, while Supply-Side Platforms (SSPs) add another 10-20%. When additional costs like managed services and ad-serving fees are considered, the effective CPM (Cost Per Thousand Impressions) can more than double from the initial bid.

Take a hypothetical scenario where a brand starts with a $10 CPM on a DSP platform. After factoring in all associated fees, the effective CPM might skyrocket to over $20. This exponential increase drastically diminishes the cost-effectiveness of the campaign. Such financial inefficiencies highlight why many advertisers remain skeptical of fully transitioning to DSP-based models for TV advertising.

The Limitation of DSPs in Supporting Linear TV Inventory

Despite the increasing shift towards digital media, linear TV still holds a significant share of the audience. Linear TV's share of viewership only dipped below 50% for the first time recently, underlining its enduring relevance. More importantly, linear TV remains a key medium for high-reach events, like the Super Bowl and the Oscars, which command massive live viewership.

The limitation of DSPs in this context is their inability to access linear TV inventory. Advertisers relying solely on DSPs for their campaigns can only tap into the streaming and digital video segments, leaving out a substantial portion of the linear TV audience. Thus, DSPs fall short in providing the comprehensive reach and scale that advertisers desire from convergent TV advertising, which blends linear, cable, streaming, and online video.

Fraudulent Activities Enabled by DSP Technology

Transparency issues create fertile ground for fraudulent activities in programmatic advertising. The automation and efficiency provided by DSPs often come with layers of complexity that make it difficult to track where ads are shown and whether they are viewed by real individuals. Cases of ads running across thousands of sites, some of questionable legitimacy, are not uncommon.

Programmatic fraud can be particularly damaging in TV advertising due to the higher CPMs compared to display advertising. While some level of fraud might be tolerated in digital display advertising as a cost of doing business, TV advertisers are far less willing to accept such losses. Direct transactions between brands and publishers, devoid of DSP intermediaries, sharply reduce the scope for fraud, ensuring that the budget allocated goes towards genuine viewership.

Exploring Alternative Strategies for TV Advertising

Given the limitations of DSPs in TV advertising, advertisers are compelled to explore alternative strategies to optimize their TV campaigns. One such approach revolves around leveraging TV-specific tools designed to navigate the intricacies of convergent TV advertising. Here are some pathways that advertisers can consider:

Direct Engagement with Publishers: By continuing to work directly with TV networks and publishers, brands can retain control over their campaigns and ensure transparency. This approach also fosters stronger collaborations which can benefit future campaigns.
Utilization of Convergent TV Tools: Platforms like Tatari, tailored specifically for TV advertising, help execute comprehensive convergent TV buys. These tools integrate with various TV formats, from linear to streaming, providing a holistic view of the campaign performance.
Blended Approach: Combining traditional direct buying methods with selective programmatic elements might offer the best of both worlds. Brands can access streaming audiences through DSPs while maintaining direct relationships for linear and major live events.

Conclusion

As TV advertising continues to evolve, it's crucial for brands to recognize the limitations of existing technologies like DSPs within this space. The traditional direct sales model's robustness, combined with the significant cost inefficiencies and fraud concerns tied to DSPs, underscores why these platforms might not shape the future of TV advertising.

Embracing alternative strategies that leverage direct relationships and specialized convergent TV tools can help advertisers achieve their desired reach and transparency in campaigns. By understanding the unique dynamics of TV advertising and adapting accordingly, advertisers can better navigate this complex landscape and drive more effective, efficient campaigns.

FAQ

Why are DSP fees so high?

DSP fees cover the costs of their technology, operations, and service provisions. However, these fees can significantly cut into the advertising budget, often doubling the effective CPM when all associated costs are added.

Can DSPs provide any benefit to TV advertisers?

DSPs can be beneficial for accessing audiences that rely primarily on streaming and digital videos. They offer automation and targeting efficiency within these segments, although they fall short in supporting linear TV inventory and ensuring overall reach and transparency.

How can advertisers mitigate fraud in TV advertising?

The best way to mitigate fraud is by maintaining direct relationships with networks and publishers, which limits the layers between the ad buyer and the actual ad delivery. Platforms that offer enhanced transparency and accountability also help in reducing fraud.

What are convergent TV tools?

Convergent TV tools are platforms designed to navigate the mix of linear, cable, streaming, and online video advertising. They provide a unified approach to managing and optimizing TV ad campaigns across different formats.

Is linear TV still relevant?

Yes, linear TV continues to hold significant importance, especially for major live events that attract massive audiences. Despite the rise of digital and streaming media, linear TV remains a critical component of comprehensive TV advertising strategies.

Why DSP Technology Isn’t the Future of TV Advertising