How Connected TV Affects Your Upfront Buy This Year

by Brian Stempeck, Chief Client Officer

May 15, 2017


Brian Stempeck, Chief Client Officer at The Trade Desk

The upfronts are upon us, signifying the two week period where ad buyers commit to their TV buys for the year ahead. But advertisers are entering this season with a closer eye on the opportunities available in Connected TV.

Viewership is up big, by more than 65% over the past year, and now accounts for 8.1% of total TV viewing for adults 18-49 in the US. Major TV players are adjusting their strategy to cater to the cord-cutting market transformation. Audiences continue to fragment across devices and screens; according to Comscore, the average household has 10 connected devices, and that figure rises to 19 devices among households with at least 4 people.

Though progress has been made, ConnectedTV is still solidifying its position in an advertiser’s media plan. We’re still in the test phases, as budgets are maxing out in the 8-figure range. But with 74% penetration for Connected TV, the opportunity is clear. What will it take to see a bigger shift in broadcast dollars?

First, we need to understand the macro trends and address some underlying challenges:

Connected TV inventory needs to prove its scale: For advertisers who are hungry for scale, there’s still too much complexity to navigate across different platforms and providers. Demand-side platforms (DSPs) can fix this fragmentation. Programmatic buying can combine inventory and add scale by aggregating direct buys, accumulating reach and managing frequency across multiple over-the-top publishers.

Networks need a compelling alternative to the ‘bird in hand’: If a network can sell 90% of its inventory at the upfronts for more than it did last year, that’s considered a win by management and Wall Street alike. Meaning, a TV seller has no financial incentive to change. Programmatic buyers have to be willing to pay a higher CPM for better targeting and higher performing campaigns. Better CPMs and better yield are the only way to move the needle for content owners and networks.

End the agency turf war between TV & digital buyers: TV and digital agency teams need to come together to structure upfront deals with both of their objectives in mind. TV agency buyers typically bring an amazing understanding of pricing, value, audience indexing, contextual relevance and scale. Digital and programmatic buyers are experts in audience targeting, analytics and optimization. Both are critical during this evolution.

Deliver hybrid performance metrics: In order for Connected TV to scale, we must speak the language of both TV and programmatic. Nielsen remains the TV measurement leader . Measuring Nielsen GRPs on Connected TV is a must-have to compare apples-to-apples. Phase two is tying in business results. For example, if you can tie the CTV user to a device graph, you can understand whether a Roku ad drove an online sale, or a store visit. Connected TV becomes another device on the device graph and another channel on a coordinated, holistic media plan.

Transparency is table stakes: The early days of programmatic TV have too often involved middlemen who aggregate TV inventory, layer on some data, and then double the CPM. An intermediary can add value, for sure. But for premium inventory to go programmatic, the lion’s share must go to the programmer and content creator. For Connected TV to scale, sellers will demand transparency.

Improve consumer experience, or else: Connected TV is still a cumbersome experience for the consumer. They have to navigate lots of different apps. They have to constantly authenticate to get access to content. And then during the show, they are often subjected to multiple viewings of the same ad, sometimes in the same pod. A higher CPM for a targeted ad means fewer ad repetition for consumers, not to mention a broader range of ads.

The future of TV is over the Internet, and it will be ad funded. The current challenge of our industry is to show fewer ads and to make them more relevant. We are optimistic about the future of TV, but buyers have to be willing to pay more for fewer, but better targeted TV ads.