NEW YORK (TheStreet) -- Media buyers are increasingly using sophisticated digital platforms to place advertising online, and as they become more comfortable using new technologies, they're pushing to apply similar systems to the largest and most expensive part of the industry: broadcast television.
Initially dismissed by much of the advertising industry as impersonal and unable to deliver quality placement, programmatic advertising platforms are designed to cut through the seemingly unlimited expanses of the Internet, matching 'buy' and 'sell' orders for video ads much like stock exchanges act as a matchmaker for equities. Besides being efficient, automated ad campaigns require a quarter of the time and personnel expenses of traditional buying, lowering costs for agencies and brands.
Now, brand marketers would like to bring these improvements to television.
"An [advertising] buyer can log into an automated platform, create all of their campaign specifics, and then launch that campaign through a self-serve digital platform," said Dan Ackerman, a programmatic advertising executive at AOL (AOL) , in a phone interview. "That's not available for television."
By 2016, spending on digital media is expected to account for more than 28% of total advertising spending, a gain of 7% over 2013, according to the latest quarterly forecast from Publicis' ZenithOptimedia unit. Total television advertising, both network and pay-TV, is expected to slip 1.3% to 38% by 2016 while the biggest loser will be print media, newspapers' and magazines.
The transition to online video, though, is already accelerating. Over the 2013-14 television season, of the 75 returning shows from ABC, NBC, CBS, Fox and The CW, only 10 increased in viewership from the previous year's season, according to Nielsen data compiled by Vulture, even accounting for time-shifted viewership patterns 7 days after initial broadcast.
In August, 196.5 million Americans watched online video, 81% of which was through YouTube, according to ComScore. During primetime hours, typically the most crucial period for broadcasters, Netflix accounts for 34.2% of downstream internet traffic.
Yet television has been reluctant to adapt to programmatic and the promise of greater accountability. At present, TV broadcasters say their advertising revenue is holding up, and indeed prices for broadcast television spots have stayed the same in recent months (an average $19 cost per impression, according to Media Dynamics data).
But as digital advertising offers marketers the data to gauge the effectiveness of their campaigns, the age-old doubts about television advertising have become more common place at a time when traditional television media accounts for approximately 45% of agency spending but only 38% of consumers' time, according to WPP CEO Sir Martin Sorrell.
"It's the first time we've seen a significant disconnect between the amount of invested and consumers' time," Sorrell said in an interview with Street TV.
The dichotomy between modern advertising-buying methods and traditional ones will become stark as ad agencies restructure to place more emphasis on digital to appeal to brand marketers' preference for programmatic. Nearly half of all of ad agencies are trimming their broadcast budgets to inject cash into digital video advertising such as streaming content from sites such as Hulu or Vimeo, according to a recent AOL survey.
While broadcast and pay-television is far from losing its clout with advertisers, the push into programmatic is forcing the $70 billion TV industry to sit-up and take stock of marketers eagerness to integrate programmatic technologies into all phases of their business.
"It's just starting to happen," said Mike Vorhaus, president of research firm Frank Magid Associates, in a phone interview. "This is just the beginning of the first inning."
--Written by Keris Alison Lahiff in New York