The line between TV and digital video is blurring. Increasingly, TV is becoming a digital ad buy, with the ability to automate data-driven buying decisions to target audiences. As video on demand and streaming gains viewer share and content producers seek distribution across platforms, ad buying across channels and devices is becoming a more singular process.

With this shift, TV ad buying is undergoing a rapid evolution away from a one-to-many to a one-to-one addressable, audience-based and cross-screen approach. It’s moving away from Gross Rating Points (GRPs) and Cost per Point (CPP) metrics for reaching broad demographic targets and toward audience targets. Using programmatic trading technology and first- and third-party data to target audiences, the ability to buy TV spots in concert with digital is finally becoming a possibility.

“What’s most exciting in smart/connected TV is that it is most closely aligned with traditional digital capabilities,” said Tore Tellefsen, VP of TV solutions at dataxu. “We think the real opportunity is taking digital audiences and activating them on OTT. The technology and plumbing is there for real-time decisioning.”

What does the TV ad-buying landscape look like?

As with any emerging technology, definitions can vary and cause more confusion than guidance. For the purposes of this article, we are looking at traditional linear TV versus addressable buying options. That essentially breaks down into three buckets:

Traditional linear TV

With traditional linear TV ad buys — against scheduled cable and broadcast TV programming — one ad is delivered to many consumers, either nationally or locally, through broadcast affiliates or satellite. Ads are bought on a contextual basis against broad demographic targets set by Nielsen GRPs, such as men ages 25-34. Ads are bought in advance — often in upfronts.

Addressable linear TV

Marketers can target specific households using data provided by broadcaster set-top boxes (STBs) and other data providers. Here operators have deployed technology on their set-top boxes to let different homes see different ads. Most major satellite and broadcast television companies have deployed addressable linear TV capabilities. Nearly 50 million US households are now addressable via enabled set-top boxes from Comcast, Time Warner Cable, AT&T and other distributors.

Addressable over-the-top & connected TV

Connected TV is simply any TV screen that connects to the internet through an over-the-top (OTT) streaming device like Apple TV, Google Chromecast, Roku or Amazon Firestick or a game console. Smart TVs connect natively. In the US, half of WiFi-enabled households stream over-the-top (OTT) content from services like Netflix, Hulu and Amazon for one hour and 40 minutes a day on average, according to comScore.

“What’s most exciting in smart/connected TV is that it is most closely aligned with traditional digital capabilities,” said Tore Tellefsen, VP of TV solutions at dataxu. “We think the real opportunity is taking digital audiences and activating them on OTT. The technology and plumbing is there for real-time decisioning.”

There is the possibility for real-time ad buy decisioning on what to serve and display to the consumer on the other side.

Dataxu’s OneView cross-device graph enables advertisers to take mobile and online video campaigns and execute them on OTT. Advertisers can also measure OTT performance using the same metrics they use for digital and mobile. “It’s fundamentally changing what’s possible on TV. We’re leveraging the same digital audiences and data about their consumers and existing customers and go find them on smart TVs,” said Tellefsen.

What about programmatic TV?

Here we refer to programmatic TV as a buying method that uses STB data to inform audience targeting using in-market, HHI (household income), household status and other attributes beyond Nielsen GRP proxy data and may use software to automate the trading process.

While programmatic provides better audience insights than GRPs, the drawback compared to addressable is that ads can still reach viewers outside of the audience specifications. There is less waste than a traditional TV buy, but there’s still waste. Only addressable enables advertisers to make one-to-one connections. Buying addressable also doesn’t necessarily mean automated or programmatic processes are employed; much is still done manually.

How big is the market?

In short: not big, but growing.

Videology, which offers a platform for buying addressable TV and video advertising, says 25 percent of impressions on the platform used first-party data (from marketers) for targeting in the first half of 2017, up from 16 percent in 2016. From Q1 to Q2 this year, addressable linear TV ad spend increased 150 percent on the Videology platform. In the first half of 2017, the number of advertisers that ran a campaign exclusively on connected TV (CTV) rose 21 percent over all of 2016. More than half of campaigns ran with a CTV component, and 90 percent took a cross-screen approach.

What are the major challenges?

Technology enablement, including automation, and communication friction across digital and television teams are just a couple of the barriers to addressable TV and cross-device and cross-platform media buying growth.

Scale challenges

The fraction of TV ad spending that goes to addressable TV is still tiny but growing. eMarketerexpects addressable TV ad spend to break the $2 billion mark in the US in 2018, up from roughly $900 million in 2016. That’s just 3 percent of all TV ad spend, however.

Historically, just two minutes of ad time allocated to local TV stations and cable operators per hour is available for addressable buying. Distributors are beginning to open up addressable inventory on network and national cable programming, however.

Measurement challenges

Another concern is a lack of measurement standards and benchmarks across all the various platforms and publishers.

In February, the Media Rating Council accredited Nielsen’s Digital in TV Ratings that measures TV content viewing on computers and mobile devices.

In March, comScore rolled out OTT Intelligence that measures US household viewing of OTT content. The service “provides a single-source view of dozens of OTT content providers including Netflix, Amazon, Hulu, and YouTube. Reported measures include household reach, audience size and demographics, along with a variety of usage metrics.”

Measurement providers in the space include TVision, mParticle and Tru Optik, which, with Kantar Millward Brown, provides OTT ad-to-offline purchase reporting.

Encroachment by Facebook & Google

The threat posed by digital giants getting into TV, of course, depends on your perspective, but both Facebook and Google are shaking up the status quo.

Last fall, Facebook confirmed it is testing ad delivery on internet-connected TV platforms like Roku and Apple TV via its Audience Network. Buying through Facebook gives buyers a way of targeting audiences uniformly across those streaming providers, in a way that is not possible by going direct. Facebook has begun licensing content and developing original content and debuted Watch, its new video hub, in August, to compete head-on with other streaming services.

YouTube is Google’s biggest and most powerful tool for luring TV dollars to digital. This spring, Google introduced a new skinny bundle, YouTube TV, in five markets. Google also announced earlier this year that DoubleClick Bid Manager will plug into several SSPs for a linear TV ad spot beta that will allow advertisers to buy TV ads and compare performance across TV and digital on the platform.

What’s next, near future?

“There will be a continued rise and spread of consumption on connected TVs and smart TVs, and not just via skinny bundles,” says Tellesfen, “but large content companies are going to have their own apps — like Disney pulling content from Netflix for their own apps for OTT. They want the direct connection to consumer. This push by the industry is a game changer for legacy content owners who’ve always distributed content through others and now have opportunity to connect directly.”

If there is appetite for parties to work together to open up addressable to national broadcast, it could mean an explosion in addressable inventory, added Tellesfen.

Addressable is not just for TV. “As soon as you say multi-device, people think desktop, tablet, phone — but we have to think beyond that. It’s our car, our refrigerator, our TV, it’s out-of-home with IP-driven billboards. There is a massive convergence happening right in front of our eyes,” said Michael Priem by phone. He’s founder & CEO at Modern Impact, an advertising firm in Minneapolis specializing in omnichannel marketing and traditional advertising for brands like Samsung and Best Buy.

Priem says this convergence and the proliferation of opportunity is changing the way clients approach rich media production budgets. They want to be able to curate creatives around audiences — including 360-degree product shots and segments for streaming audio. “We think about video in advance, even in an e-commerce perspective,” he said.

“You need audience-based data in order to drive outcomes, and that’s finally available,” said Brian Katz, VP of advanced TV insights and strategy at Eyeview, a platform that can distribute video content across television, desktop, mobile and Facebook. “Brands can finally buy households instead of programs and dayparts using data, which is a huge step forward. This is a great time for brand marketers to include Addressable TV in a cross-screen campaign with digital video, and based on our conversations with those marketers, we think there will be some experimentation in this area during the September scatter market.”