The Connected TV Advertising Value Chain | In Practise

The Connected TV Advertising Value Chain

Former Head of Sales at Magnite and Director of SlingTV

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Executive Bio

Adam Lowy

Former Head of Sales at Magnite and Director of SlingTV

Adam has over 24 years experience in the advertising industry across all parts of the value chain. He is Former Head of Sales at Magnite, a leading standalone SSP, where he was Chief Commercial Officer at Telaria before the merger, responsible for scaling the CTV ad business. Prior to Magnite, Adam created and launched SlingTV which he scaled from $0 to $90m in ad sales per year from 2012-18. He has experience as a publisher working with SSP’s and DSP’s and as a SSP within the value chain. Adam started his career with 11 years at ABC and 2 years at CBS in the early 2000’s.Read more

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Interview Transcript

Disclaimer: This interview is for informational purposes only and should not be relied upon as a basis for investment decisions. In Practise is an independent publisher and all opinions expressed by guests are solely their own opinions and do not reflect the opinion of In Practise.

Adam, can you take a step back and share some context to your role at Sling TV when you were building up the CTV ads?

I was at Dish Network, the owner and founder of Sling TV, since 2012, and I left at the end of 2018. Sling TV was a project that, from the advertising perspective, I spearheaded, built, ran, and set up, really from its inception, ad sales, and building a team. That started in roughly 2014. It was the first live streaming CTV solution using advertising and putting it into the compartment of a VMVPD or virtual operator. It was the first of its kind. I built that from scratch. I came up with how it would be sold, who the partners would be, what we needed to do to get measurement, what we needed to do to get some revenue going into the business, and then we started the rising tide lifts all boats philosophy. This idea was the entire pitch for swinging the marketplace, besides the consumers and the eyeballs shifting, to get more money moving into the space. It got more folks into the game from an advertising perspective, thus driving more money and more TV dollars.

What was the big challenge in moving those dollars over to CTV?

There were a ton of them. First of all, there are digital dollars in the space, and we wanted to get the digital dollars into CTV. But we identified that for CTV and CTV advertising to take hold, we wanted the big meatball; as Mark Zagorski, my old boss at Telaria used to say, the $70 billion of TV money. If we could move that over to CTV, that's the big kahuna, that's the big thing. There was social money running over, digital money, but that was the big kahuna. The challenges were massive; they still are. When we were building, the measurement that was – and still is – trying to be figured out was a currency. It was something on which CTV could be bought and sold where the buying community would accept and exchange and trade. Understanding and explaining the space, how it works, and what you're buying was so new in 2015, 2016, 2017 when we started to market and we were trying to get folks to understand what it was and how it worked.

Then to buy on impressions, that was a big one. It's also called audience-based buying. Having to change over to the philosophy and thinking for the agencies of impression-based buying as opposed to GRPs and selling on a formula – which has existed for years in the TV space – was a huge undertaking. It still is, but when this first started years ago, forget about how you're doing your numbers, forget about the dollars game you're selling on now; we have a different way for you to do this, and it's very similar to digital.

That was a problem in itself as well because then I would just get thrown to the digital side, which was fine. We accept it, we always take digital dollars, but this is television. It was live streaming television, the shows that you all know. It would be addressed through impression-based and audience-buying from a targeting perspective. The whole thinking was a complete mind shift of the business and the buying community to understand what was happening. There was an incredible amount of challenge, but getting in the door and explaining it and getting into the right worlds at the agencies to get into the business was a tough one years ago. Now we're seeing changes happening where it's becoming a mainstream philosophy of buying. Everybody needs to get into CTV and all of that, but I'm giving you stuff from seven, eight years ago when this was trying to get its feet on the ground.

Where are we today with CTV's attribution model versus linear models?

All co-attribution proof of buying and return, that's still trying to be figured out with many formulas and concepts and ideas. Still, digital certainly helps compared to television buying. We still have a lot of the same issues, yet a lot more money is being thrown into the place. The players are bigger. It's more the first thought, not the last thought, or a might-have in a media plan, which is cool. It's becoming more mainstream because the eyeballs are proven, the content is proven. The entire ecosystem is on board with CTV. The brands, agencies, folks involved with its buying and selling in the middle in terms of currencies, problematics, and technology in the middle, and the publishers are on board. It's becoming more about a must-have – not a nice-have – and a buy.

There is a ton more money going into content, into how deals are being done, and I think the big answer to your question is the upfront dollars. The dollars in television that are big and command the buying and selling and knowing your ad business for a year, those upfront dollars are coming in. This is the television money and the commitments to guarantees coming over. This completely changes the dynamic of CTV. It is in the next step of growth, and the dollars are showing there. I think now you're looking at CTV as a $14 billion advertising business, and next year I think it's $16 or $17 million. It's continuously growing. The numbers are astounding, and I think we're talking about $27 to $28 billion by 2025. It's incredibly exciting to see this all happening.

When you refer to upfront, you mean the advertisers are putting upfront commitments for CTV ahead of schedule?

Yes, the TV-buying philosophy going for years and years with the agencies and the publishers is guaranteed dollars. It's a marriage between both sides with the premium folks such as ABC, NBC, CBS, Fox, etc., and the advertisers wanting to commit or pre-buy or reserve space or ad units in your shows. What shows do you have? This will fit my brand, this is where my brand is going to launch, or this is where I have a heavy-up campaign. Let's come together during this time. I want to reserve spots because it's about getting a more favorable price now than in what we call the scatter market, closer to when the show actually would air or run. So there's the upfront and the scatter.

The upfront in traditional television was roughly 60% to 70% – it used to be 80% – of the inventory that reserved or bought and sold during the upfront time, and the rest was done during scatter. I think it's a little less now; maybe 50% to 60% depending on the environment in the marketplace. To have CTV in the environment of upfront sales completely changes the thinking and the paradigm of the amount of money going into the space. It's helpful for a publisher who has to plan and look at my business to know that I have commitments done in the upfront. To know I'm going to have X millions or hundreds of millions of dollars coming forwards, already planned, helps me run my business and work on better pricing because there's so much reserve.

What about different forms of programmatic buying? Looking five years out, what do you estimate the percentage of the CTV mix between reserve auction and open auction will be?

Off of the upfront and the scatter world, your question is now about open auction to a programmatic reserve. I'm going to give you three buckets here. Here is what we call programmatic: the AGs, the automated guaranteed deals; the PMPs, the private marketplace deals; and the OAs, the open auction deals. Those three pieces make up the buying within the programmatic ecosystem. The automator technology takes the buy-side and sales side together, and therefore you get the automated buying.

Connected TV, in particular, is pretty much all done on PMPs or private marketplaces; there's a little bit of AGs, not much, and there's really no open auction right now. Why? Because of control, fear of fraud, understanding your buyers coming in. The whole philosophy of OA is not quite there yet, and there's also a fear that that will open up the front gates, erase the bottom, etc., like the online digital worlds that we saw happen years ago. By the way, we display our online world as roughly 85% programmatic. So putting that together in a few different ways, programmatic will continue to seep into CTV and will continue to be a bigger part of publishers' business, no question about it. It's happening today. I saw it happen continuously when I was a publisher at Sling, and I know all the publishers are saying it's happening now, too. That's all PMP deals with a little bit of AGs at most; not much at all.

To your question of how much of that could be open auction, I think we will see open auction at the CTV premium probably start to seep in in the next three or four years. Some people disagree with me, and that's fine. Still, I think it has the potential to come in because of the pressure in the business, the amount of money that content needs to have the top-tiered talent to create these wonderful shows, and the pressures of all these companies going public. They're putting more of a focus on their CTV business. Therefore they say, oh my gosh, the pressure of my ad sales business is only growing more and more and more. My fill rate or sell-out rate is 50%, 60%, 65%; what about the other 35%?

You could have a reselling world if you want; some do, and maybe that doesn't interfere with your direct sales business or however you're run. Still, you have to fill that, and that's what open auction is going to do. I feel as if at some point, there will be some publishers that will have pressures on them to say we have to bring in more money to handle this business, and some folks will start to bring in some open auctions there. I don't think the buying community will have a problem with it as long as it's more controlled, and obviously, it's got to be fraud-focused and protected. I do feel as if we might see that over time. Just given, again, also how display in the online world developed over time, it seeped in there pretty quickly as well.

Why aren’t publishers more open to doing open auctions sooner?

Control, fear of fraud, also, many of them have sales teams where they will go and sell to Honda, or they will go and sell to P&G, and all of a sudden it starts coming in at a much lower rate through an open auction. That will crush your pricing, crush your relationship, and crush that whole business. That could be a problem as well, and if they know that they're getting in enough of their demand into your publisher through an open auction, most likely, it's going to be at a lower price. Why do I need to do these higher price PMPs? I'll just cut deals with you. What are you going to give me to offset that difference? But from the top, it's about control and fraud and not bringing in the bad actors because open auctions can bring in a lot of that.

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The Connected TV Advertising Value Chain

October 20, 2021

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