Radio Seeks to Unlock Programmatic Potential

There has been a lot of buzz in the radio industry about programmatic ad buying. Yet the topic remains new to many people, and the infrastructure is in its early stages of development.

The session “Unlocking Programmatic’s Potential” at this month’s Radio Show in Atlanta aims to illuminate opportunities facing buyers and sellers related to programmatic ad inventory, and to describe internal challenges facing tech companies as they leverage programmatic ads.

Jelli’s RadioDash provides real-time insights of digital ads for buyers and sellers of broadcast radio advertising. Proponents say such tools will help radio better compete.
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Credit: Source: Jelli
Matt Prohaska, CEO and principal of Prohaska Consulting and session moderator, says programmatic advertising is an important topic simply because it is so new to many in radio today. “For many attendees, it is a fresh subject, so everything is up for grabs. What exactly is programmatic? What preconceptions do they bring to the table? What do they need to know about it in order to make intelligent decisions? What will the programmatic playing field look like one to five years from now?”

Carl Fremont, global chief digital officer at MEC, noted a lack of exact agreement on the definition. He said the word is being used in many ways, but the common denominator is that computers and automation are involved.

“It’s about automating the buying and selling process, regardless of whether it is radio, television, print or online media.”

INFORMED DECISIONS

 But managers won’t just be able to sit back and reap the rewards of programmatic, said Prohaska; they need to learn about it, especially during the startup phase.

“This is an entirely new form of selling. The benefits of programmatic hinge on the speed of the transaction and the targeting of audiences. This can lead to higher overall revenue, but managers need to align the right teams and technology.”

Mark Gray, president of Katz Radio Group, said education is key to success with programmatic.

“They need to understand it from the technical point of view. Who are the players? How is the technology evolving? They also need to develop an action plan so that they can be prepared.”

U.S. programmatic ad spending is expected to double over the course of 24 months, as shown in this chart from Katz Media Group.
Credit: Source: Katz Media Group
BREAKING DOWN PRECONCEPTIONS

As with many endeavors where computers enter the workflow, Fremont said programmatic has caused some salespeople to worry about job loss; in this case, he feels, the worry is unfounded.

“Programmatic will automate the administrative back end of the process, but it should not replace the one-to-one dialogue between the buyer and seller. There should, in fact, be more time to be proactive and creative in structuring win-win scenarios. Sales people can focus on defining the greatest value that their station can bring to a brand.”

Another preconception, according to Prohaska, is that programmatic is limited in its scope. “Some believe that programmatic is only centered around a transaction type called ‘Open Auction’ or ‘Real-Time Bidding.’ It is true that RTB was the only type from 2007 to 2013, but now there are other forms of programmatic transactions that have advanced beyond RTB.”

Loss of control is another cited concern. Gray said, “There is a fear that with programmatic, a station’s ad inventory can be sold out for pennies on the dollar, largely due to RTB trading. In a fair exchange, stations have the ability to set their own rates. In fact, the greater exposure created by programmatic can lead to an increased demand for inventory, which could in turn, increase the rates.”

CHANGING LANDSCAPE

Programmatic advertising, particularly in radio, is in its infancy. What will it look like in five years?

Brian Burdick, executive vice president for digital and programmatic at supplier WideOrbit, thinks the playing field will shrink.

“A couple of players will emerge as clear winners. As a result, it will be easier for national buyers to purchase a large amount of audience. And between 10 and 20 percent of the business will be fully automated by software.” He said broadcast television has taken an early lead, but he expects radio to catch up.

“It will take about five years for radio to catch up with TV. Radio is more ready for programmatic than TV, but we’re seeing more activity in television due to the size of the dollars. To reach parity, the industry needs to communicate to buyers why radio is such a good value proposition for them.”

Prohaska sees changes in the IT infrastructure moving forward. “Most of the core advertising technology and systems should move to digital for both buyers and sellers. Also, the addressability to serve more targeted ads beyond a standard demo will be common.”

Gray expects programmatic to grow to about 25 percent of stations’ revenue in five years. “There will be a shakedown in the number of players; those with the best solution will come out on top.”

Advocates say programmatic has the potential to add significant dollars to a station’s advertising budget.
Credit: Source: Katz Media Group
BIGGEST CHALLENGES

While U.S. dollars spent on programmatic appears to be growing rapidly, there are challenges for buyers and sellers on the road ahead.

“Things could get complicated from a buying side,” said Gray. “If there are too many players, exchanges can become difficult. What we want is to make things easier for buyers. You do that with features like real-time reporting so buyers can make better decisions.”

Prohaska said, “Buyers need to understand the ad product and inventory ‘apples and oranges’ differences as the technology and buyer objectives evolve, showing what can and cannot be sold programmatically. Overcoming the preconceptions, fears and concerns mentioned earlier is important. They need to realize that there is much more to gain by learning and leveraging what programmatic brings to the table, rather than standing on the sidelines with arms folded watching the evolution happen around them and to them.”

Burdick feels that on the traditional buying side, radio need to take steps to be competitive with digital.

“How can we add technology and infrastructure and change the workflow so you don’t have to do reconciliations?” he asked. “Right now, they put radio at a disadvantage when compared to digital media, and they consume enormous amounts of time and energy.”

On the new money side, “We need to make sure that radio is part of the menu that digital buyers purchase from,” Burdick added. “Can we find ways to measure radio spots as a bundle of impressions? Can we measure the impact of an ads performance?”

Prohaska expects programmatic to have a dramatic impact on the industry over the long run. “Teams that eventually integrate programmatic solutions into their salespeople and operations leads will learn more, be smarter for their clients and make more money. Those that don’t eventually, not in 30 days but eventually, will be challenged to secure similar budgets at similar pricing going forward.”

Related:
Katz Programmatic Pilot Runs Spots in Buffalo, Boston


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