In January this year, DataXu received USD$10m (£8.2m) investment from Sky, signifying the growing importance of and focus on programmatic TV. Tore Tellefsen, vice president of TV solutions, DataXu explains to ExchangeWire how programmatic TV is evolving, the opportunities to scale, and how DataXu's partnership with Sky is developing.

ExchangeWire: How is programmatic TV developing? What is its uptake?

Tore Tellefsen: Although brands have funnelled billions upon billions of media dollars into television advertising over the years, TV has never been a particularly precise or targeted way of reaching consumers. Programmatic TV (PTV) is finally set to change all that.

PTV can be broadly defined as television inventory that’s bought and sold through the use of software automation and advanced audience data. Its value, in 2016, lies in the fact that it bridges the gap between traditional television’s appeal and broad reach and two inarguable industry trends: shifting consumer behaviour, and the proven effectiveness of programmatic media buying.

Consumers are not watching programming solely in front of the television screen anymore. They are consuming 'content' on-demand wherever and whenever they want to – outside, inside, on a plane, anywhere – via their smartphones, tablets, laptops, and TVs.

Meanwhile, the utilisation of programmatic advertising within digital channels is at an all-time high, enabling brands to target highly specific consumer segments in the process. Over the last few years, programmatic display, programmatic mobile and programmatic video have effectively set new baseline standards for marketing, in terms of technology-driven marketing’s ability to get the right eyeballs on the right ads, with fewer impressions getting wasted in the process.

PTV extends the tremendous benefits of programmatic advertising beyond the realm of digital and into the traditional television space. This means broadcasters can sell inventory programmatically and advertisers can use advanced audience data to target highly specific consumer segments. But when we talk about PTV, we’re really still referring to the future. Because, granted, programmatic TV is still in its infancy. It is not yet hyper-targeted or taking place in true real-time; so the capabilities we have access to right now are just the tip of the iceberg. Programmatic spending on TV ads is set to increase by over 125% this year alone. After a slow start, due to issues with limited scale and pricing, the industry is finally poised for tremendous growth and improvement.

You’re turning a broadcast medium into a narrowcast medium – how is it scalable?

In some respects, programmatic television is turning a broadcast medium into a narrowcast medium – enabling the ability to directly target TV ads to specific households. This capability exists today with household addressable television available through certain cable and satellite companies and enabled in over 40 million homes on a wide array of cable channels and video on-demand content. Delivering highly personalised ads doesn’t mean marketers have to sacrifice reach; instead, they will be reaching out to only the right people. This means each impression will be of greater value, which will, ultimately, lead to greater return on marketing investments.

In other areas, such as traditional linear television, programmatic does not change how the medium is delivered. It will remain a broadcast medium – defined here as the transmission of content without any differentiation between the targeted viewers – wherever a programmatic TV ad is aired. In the case of a TV ad placed on a national broadcast or cable channel, the ad is seen by everyone in the country tuned in to that national channel at the time the ad airs. In the case of TV ads placed on a local broadcast or local cable channel, the TV ad is seen by everyone who is tuned to that channel in that local geographic area at the time the TV ad airs.

What has changed in linear television, with the advent of programmatic, is how TV ads are planned, scheduled, and measured. Programmatic linear television uses advanced data and analytics to identify the specific geographies, channels, times of day, and programmes that are best suited to reaching an advertiser's target audience, and then uses software automation to plan and purchase TV ads on those networks and programmes. Marketers will be reaching more of the right people, which means each impression will be of greater value, which will ultimately lead to greater return on marketing investments.

Answering the question of scalability across both of these types of programmatic television (household addressable and traditional linear) is not so much a matter of how is it scalable, but rather when is it scalable. It's a function of when programmers, broadcasters, and cable and satellite companies will make inventory available programmatically. Inventory has been slowly opening up as publishers and advertisers get onboard with programmatic and realise what it can do. The good news is that inventory growth is accelerating and more and more advertisers are moving into programmatic television. Recent programmatic TV spending forecasts project that over USD$11bn (£9bn) will be spent on programmatic TV in the next few years in the US, with USD$5bn (£4.1bn) likely to be spent internationally.

How does data enhance programmatic TV?

Data is one of the fundamental elements of programmatic. This is certainly true for TV. Say that a car manufacturer wanted to advertise its brand-new, seven-passenger minivan on television. PTV can help the brand target the audience most likely to buy its vehicle. By layering online behavioural data and first-party audience data over television audiences, programmatic enables advertisers to reach potential customers more systematically. A brand could, for example, show its minivan ad to households that have already researched minivan models online. And for those consumers who have previously shown interest in a competitor, the brand might serve an ad that explains what makes its minivan is better than all the rest.

A few innovative brand advertisers working with DataXu have already begun to test the waters of PTV. One car company, for example, is using PTV to target potential auto buyers. This led to a 15% increase in sales with the target audience, when compared to a control group. A telecom company looking to drive SMB owners to their website used PTV to place TV ads in local markets on programmes with high concentrations of SMB owners, which led to a 5x increase in web traffic for the brand.

Where does TV fit into the cross-channel mix? How targetable and measurable is it alongside other screens and devices?

TV is becoming an essential component of a marketer’s cross-channel mix because 'television' no longer means sitting down at the same time each week to watch your favourite broadcast TV show. With viewers moving more seamlessly than ever across devices to watch content via Hulu or HBO GO, the definition of TV has broadened to include the consumption of all video content across a variety of channels.

And, as with digital advertising, real-time cross-channel analysis is key. Unfortunately, too few partners offer marketing technology capable of real-time cross-channel analysis. But that is the only solution to creating the most efficient mix possible.

Another challenge with PTV is that the industry currently lacks standardisation. In order for PTV to succeed, the industry needs to set standards that put broadcasters and tech partners on the same page in order for brands and broadcasters to buy, sell, and implement ads seamlessly.

PTV is a clear sign that brands are moving away from channel-specific marketing in favour of audience-led engagement. In order to truly understand brand customers, advertisers need to understand their behaviour. Today, that means getting a holistic view of their interests and behaviours as they move from smartphone, to tablet, to television, and beyond.

In January this year, Sky announced a USD$10m (£8.2m) investment into DataXu. What has this partnership done for both parties?

Sky’s investment in DataXu represents an exciting partnership for both companies. It serves as a clear indication of the growing importance of PTV within the market – and the opportunities that data and analytics offer to those buying and selling TV inventory.

As Sky’s official demand-side platform (DSP) of record, DataXu bring programmatic marketing expertise into the world of television to help Sky aggregate, analyse, and optimise their customer data. DataXu takes Sky’s information from three million European households and combines it with details obtained from cookies and IP addresses to gain a holistic cross-channel look at consumer behaviour. This allows Sky to deliver ads that are highly specific and targeted for increased brand engagement.

DataXu and Sky are pioneering a cutting-edge approach together, and both companies are excited to be leading the way.