ESPN Tests the Waters in Automated Ad Sales -- News Digest [Breaking News]

December 8, 2014 Mike Shields and Jack Marshall

Breaking With Tradition, ‘SportsCenter’ to Make Room for Ads Bought Via Web

In a few weeks, ESPN will begin selling some ads for its “SportsCenter” highlights show through a Web-based auction, instead of the old-fashioned yet enduring methods such as taking orders over the phone. The 30-second spots bought this way will air during telecasts on a giant video wall, a feature of the show’s expensive new set.

The sports media giant’s move is among the most aggressive steps yet by a TV network to embrace the automated, or “programmatic,” ad sales tactics that have become a big force in the online ad world. EMarketer estimates that programmatic online ad-buying in the U.S. will grow 137% this year to $10 billion.

In a few weeks, ESPN will begin selling some ads for its “SportsCenter” highlights show through a Web-based auction, instead of the old-fashioned yet enduring methods such as taking orders over the phone. The 30-second spots bought this way will air during telecasts on a giant video wall, a feature of the show’s expensive new set.

The sports media giant’s move is among the most aggressive steps yet by a TV network to embrace the automated, or “programmatic,” ad sales tactics that have become a big force in the online ad world. EMarketer estimates that programmatic online ad-buying in the U.S. will grow 137% this year to $10 billion

For the most part, the $70 billion U.S. TV ad market has resisted the trend. Much of the selling—greased by lunches, drinks and face-to-face pitches—happens well before shows air, and automated auctions aren’t as appealing to sellers as on the Web. Networks worry that computerized selling could hurt the premium prices TV has enjoyed.

Selling ads in real time and placing them on the fly—all of which is possible on the Web—is a much bigger challenge on TV, where ads are often baked into shows to air in preset commercial breaks.

“On the Web I can decide [using technology] which ad gets shown to which viewer at the time that viewer is engaging with that content,” said Krishan Bhatia, a digital ad sales executive at Comcast Corp. ’s NBCUniversal, which owns NBC. He said technological hurdles must be surmounted before that approach works in TV.

ESPN, which is controlled by Walt Disney Co. , isn’t jumping in all the way. Ads sold the traditional way will continue to run. The programmatic ones are additional spots featured differently during “SportsCenter.” Still, the company sees promise in the technology and wants to be prepared to offer it to advertisers, who are starting to shift dollars to digital outlets, because of the efficiency and, increasingly, the more precise audience targeting.

“This is a marketplace where money is clearly being moved to programmatic channels,” said Eric Johnson, ESPN’s executive vice president of global multimedia sales. “I think this will be in high demand.”

Mr. Johnson said the technology ESPN plans to employ for the “SportsCenter” sales is a work in progress. The company is building proprietary electronic tools to sell ad space during two prime “SportsCenter airings”—6 p.m. and 11 p.m.—to one advertiser each day.

The ads will run on an imposing, nearly 13-foot wide and 10-foot high video wall.

ESPN will set a base price for this inventory; if no advertisers are interested on a particular day, no ads will run and fans will just see 30 more seconds of “SportsCenter.” The first ads sold through the new method will run in January. ESPN has already begun talking to a few clients about it.

Pressure is building on the TV industry as a whole to adopt more of the strategies and habits prevalent in Web advertising, including automated buying and selling.

A generation of digital-savvy executives is coming of age at marketers and ad agencies, pushing for change.

“Brands are starting to get accustomed to knowing a lot about audiences,” said John Nitti, chief investment officer at ZenithOptimedia. “They want this in TV.”

The TV ad business has been on shaky ground lately, denting the earnings of several big media companies. Ratings are down across many major networks, and this year’s “upfront” market—when advertisers bought inventory for the fall TV season—was soft.

Media executives are hoping that big marketers that have held back money are just waiting to spend it at the 11th hour, closer to when shows air. But many of them acknowledge that some ad dollars previously earmarked for TV are heading to digital channels.

ESPN is in a relatively strong position compared with the pack. ESPN ad revenue increased 5% in the third quarter, when other heavyweights in the cable world reported minor growth or even a decline. The network is averaging 3.5 million total viewers this season, up 17% over last year, according to Nielsen.

However, the audience for “SportsCenter” has slipped this fall. According to Nielsen, the late edition of the show averaged 719,000 viewers from September to November, down from 832,000 in the same period last year.

TV networks including NBC and Disney’s ABC have started conducting limited experiments with programmatic technology—but primarily for ads that run in online videos, not on television.

NBC has been helping advertisers target specific users with video ads placed within episodes of shows like “The Blacklist” streamed on NBC.com. Similarly, ABC ran a pilot test over the summer through which advertisers could use data to target audiences with ads in Web videos streamed on ABC’s various websites.

The most ambitious programmatic initiatives are likely to happen first on cable networks with small audiences, as well as cable and satellite-TV providers, which sell ads to local businesses like car dealerships and restaurants, industry experts say.

Mike Zeigler, vice president of business development and operations for Cox Media, the advertising division of the cable company Cox Communications, says his company has partnered with outside firms to sell some TV ad inventory through programmatic technology. The companies Clypd and AudienceXpress are among the firms Cox is working with, according to a person familiar with the matter.

Among the shows that some advertisers are buying via Cox’s programmatic offering is AMC’s apocalyptic zombie drama “The Walking Dead,” said a person familiar with the matter.

“We see big brands coming on,” Mr. Zeigler said.

Other cable operators say they are examining and evaluating programmatic ad sales tools and strategies but aren’t selling significant portions of their inventory that way yet, if at all.

Joan Gillman, chief operating officer and executive vice president of Time Warner Cable Media, the ad sales division of Time Warner Cable Inc., said the company is also studying its options, but expressed some concern about the potential impact on ad pricing. “The current programmatic platforms will commoditize inventory and by their nature drive pricing down,” she said.

ESPN is already trying a programmatic approach to selling inventory from its online properties such as ESPN.com. On certain major sports days when digital audiences surge, the company allows select advertisers to use electronic tools to buy some ad inventory. Those tests have gone well enough to give ESPN confidence to try this sort of thing with TV inventory.

Mr. Johnson of ESPN said he believes the network’s approach will keep ad prices at a premium, particularly on days with heavy sports interest—like the day after the Super Bowl—when ESPN plans to use the auction option.

“Programmatic doesn’t equal cheap,” he said. “We’re not afraid of technological change.”

Source: The Wall Street Journal

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