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Programmatic TV Fee Structure: Transparency Needed

March 31st, 2016   ||    by Susan Kuchinskas

It seems like every kind of media buy has its own fee structure—there’s no consistency. Media buyers have accepted the different negotiation practices involved in buying linear TV, as well as connected television, digital, streaming, and over-the-top video. Now, they have to grapple with understanding the fee structure for programmatic television.

There are clear benefits to programmatic buying of television for buyers, sellers, and agencies. Advertisers benefit from better campaign performance and ROI. Agencies can enjoy a more streamlined workflow, and broadcasters and station groups can achieve better pricing on inventory.

But a lack of transparency in the fee structure associated with programmatic TV could hamper the adoption of this technology, says Mitch Oscar, president of HocusFocus. In a recent op-ed on MediaPost, he writes that, in the process of negotiating a local programmatic television buy, he asked the vendor whether there was a transaction fee. Oscar goes on, “Understanding and accepting that we were engaging in digital modeling, of course there would be an ad-serving fee. No problem. Gross or net? Silence.”

The sales rep’s silence may have been due more to a lack of education than to a desire not to disclose the fee structure. Nevertheless, this is an issue the industry needs to solve.

Fragmented Business Models

The prices of programmatic TV ads are competitive—equivalent to ads bought via manual negotiations, according to Katana Media. However, in the world of digital ads, some agencies and brands have found that the various fees from platforms and data providers eat into ROI, according to Ad Age.

Negotiations for TV buying are complicated enough. Many agencies have established new divisions to deal with the increased complexity, according to Ad Exchanger. Tracey Scheppach, EVP of precision video for SMG, said these very sophisticated negotiations usually involve at least 12 data and technical partners.

Companies in this rapidly evolving sector use a variety of business models, notes Walt Horstman, president of Audience Express, in Ad Exchanger.

Some programmatic TV platforms pass the transactional fee back to the stations providing inventory. Others offer all-inclusive gross packages that include the inventory with additional charges for transactions and posting. And, as Oscar points out, the fee may be charged on the gross or the agency’s net.

“Transparency around the business models in the marketplace are important to ensure that goals and incentives are understood and properly aligned,” says Horstman.

Solving the Transparency Issue

Jason Burke, vice president of product for Clypd, writing on the BrightRoll blog, thinks the answer could be to automate even the negotiation process. Negotiation, planning, scheduling, and reporting could all be integrated, he says. Doing so “can streamline the workflow, while respecting the business rules and relationships that have defined TV advertising.”

There may be other solutions. In the meantime, programmatic platforms and other vendors should provide transparency in the fee structure. Otherwise, Horstman warns, “Without resolution, they could inhibit programmatic TV’s growth due to uncertainty from agencies and advertisers about how their campaigns are actually being run.”

To find out more about programmatic TV fees, reach out to Videa.

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