Spending on programmatic and addressable TV has been rising for some time, albeit by a small portion of total TV ad spend, as advertisers and consumers move away from traditional broadcast TV.

In June 2022, streaming video surpassed one-third of all video viewing, up from 27.4% the previous year. At the same time, the share of broadcast television was just 22.4%.

And OTT is just a fraction of the programmatic TV pie.

The approach allows better integration across distribution channels for media platforms, reducing ad load and ultimately translating into a better consumer experience.

For media buyers, the benefit is in data-driven and addressable ads, which they’ll continue to put a premium on as Google sunsets third-party cookies and other ecosystems, like Apple, do the same.

With iOS 14.5, Apple brought the long-anticipated “App Tracking Transparency” feature to the table, requiring companies to ask iPhone users for permission to track them across apps and websites.

Apple’s unveil immediately posed seemingly insurmountable challenges for mobile advertisers and social platforms that rely on the technology, like Facebook. For example, Apple’s App Tracking Transparency was expected to cost Facebook $13b in 2022.

But with programmatic TV advertising, media buyers can pinpoint ads based on demographics, keywords, and browsing history—all without third-party cookies. It’s good news as advertisers across industry lines search for alternative identifiers to power their campaigns.

But to take advantage of this promise of programmatic TV advertising, media companies and advertisers must clearly understand the shape programmatic takes in TV and its potential.

This glossary will walk you through the key terms you need to know to make the most of programmatic TV advertising this year.

#1: Programmatic TV Advertising

Programmatic advertising is nothing new — Google has monetized its search engine, and websites have taken advantage of Demand Side Platforms (DSPs) to make reaching advertisers easier since soon after the dot-com bubble burst.

While programmatic ad spending is slowing (largely due to the economic downturn), advertisers are still spending billions. In 2022, more than 90% of all digital display ads were expected to be bought programmatically.

But programmatic TV has allowed the digital exchange to move into television, typically associated with more traditional ad buys.

Like digital DSPs—think Google Marketing Platform and MediaMath—programmatic TV lets advertisers buy planned inventory sold based on how many impressions it will make. As advertisers pay for clicks on Google, they can also buy their inventory based on more than ad length with programmatic TV.

It’s a total win considering traditional TV largely operated behind a curtain, preventing advertisers from gaining visibility into performance and targeting.

Programmatic TV also means marketers can optimize their ads with audience data, focusing ad spend on where it will matter most.

As Digiday put it back in the day, “Programmatic TV advertising is the data-driven automation of audience-based advertising transactions.”

#2: Connected TV (CTV)

Connected TV (CTV) is a device connecting to a TV to support video streaming. Popular CTVs include Smart TVs, Chromecast, Apple TV, FireTV and now Xbox. In 2022, 87% of households in the U.S. own at least one CTV.

As such, CTV advertising allows advertisers to programmatically purchase ad inventory across these devices and reach a growing addressable audience with immersive ads.

Connected inventory in programmatic TV varies slightly since the metrics it uses can account for how many times the video was watched, how many people skipped the ad, and how many times the video was watched completely.

Understandably, advertisers love it. According to the IAB, CTV ad spending is supposed to grow by more than 14% this year.

#3: Addressable TV Ads

Besides the lower cost (compared to traditional TV advertising, which can cost millions during primetime events like the Super Bowl), addressable ads are the real draw of programmatic TV.

Addressable ads are essentially personalized ads deployed at scale on CTVs. While YouTube ads can be highly targeted based on browsing history and demographics, they are typically limited to one creative (often shown multiple times to the same person), which can lead to ad fatigue, i.e., someone sees an ad so many times that they become bored with it and stop paying attention.

In contrast, addressable TV ads let advertisers present different versions of the same ad (or completely different ads) to viewers of the same program — a live sports game, for example.

The benefits of addressable TV ads are clearly too much to pass up.

According to a recent survey, 81% of advertisers are satisfied with addressable TV ad options, an increase from 72% last year. Of those polled who are currently using addressable TV ads, 37% plan to increase spending this year.

#4: Linear Ads

This term can be confusing since ‘linear’ is used interchangeably for the addressable ads described above and more traditional media delivered through OTT.

Linear ads (or linear inventory) are purchased on a platform, making them part of programmatic TV inventory. But the ads are delivered linearly, targeted based on audience metrics and reported on with traditional viewing metrics.

#5: Programmatic Ad Platforms

This is where media companies can use ad networks to sell ads (demand side platforms) and where media buyers can find the audience reach they need (supply side platforms).

For programmatic TV advertising to work at scale, DSPs, SSPs and programmatic ad networks must work together.

“Say you have a service with a million or so subscribers. That million number isn’t very exciting for a big advertiser,” says Jim Lombard, co-founder of Tetra TV. “So you need to pull together more ad opportunities and more households. That’s the opportunity for us to pool this inventory together so we’re able to monetize it more effectively with reach and frequency. It serves the purpose of pooling inventory and creating scaled value.”

#6: Data Management Platforms (DMP)

Data management platforms (DMP) aren’t directly tied to the ad seller-buyer relationship, but they are critical for brands getting the most out of programmatic TV ads.

A DMP can be used by software and media companies to collect data (first-, second-, and third-party data) on an audience, split the audience into segments, and then offer these segments to engage their target audience. DMPs then offer these anonymized customer profiles to DSPs, SSPs, and other ad platforms.

DMPs are the foundation of ad networks, as media companies, apps, and websites pool data together and allow advertisers to truly understand—and target—the right consumers. Larger brands also use DMPs to identify and target promising prospects.

#7: Programmatic Inventory Metrics

Programmatic TV metrics are made possible through connected TVs or set-top boxes, which allow access to cable, over-the-air and OTT television. The source is accounted for when reporting on programmatic TV ad metrics.

The programmatic inventory’s primary metrics include impressions, targeted market area reached, and cost (i.e., CPM).

While these metrics are already more specific than traditional TV, programmatic metrics will have to catch up for advertisers to get the most out of their programmatic campaigns. Social and search ads have gone granular, and programmatic TV will soon need to do the same.

Making the Most of Programmatic TV Advertising in 2023

Programmatic TV is an up-and-coming addition to the ideal marketing mix for advertisers across industry lines. As consumers ditch traditional TV for streaming and targeting data continues to get a facelift, advertisers will be forced to find alternative outlets for their ad dollars.

Programmatic TV—as well as the entire programmatic advertising landscape—will be one of them.

That said, programmatic TV advertising isn’t just one thing.

Like traditional broadcast advertising, programmatic TV involves a range of interrelated terms.

Understanding them is key to making the most of it in 2023 and beyond.

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