Has supply path optimization lived up to its promise?
A mounting burden on tech resources. Redundant bids on the same inventory. A knotty ad supply chain dotted with unfamiliar vendors. The urgency to show ROI, while fumbling for insights in the dark.
That’s where programmatic buyers found themselves right before the beginning of supply path optimization (SPO). Buyers took it upon themselves to light a path to the inventory they wanted, without losing value in the process.
That’s what supply path optimizatio is all about, and along with DPO (demand-path optimization — the sell side’s simultaneous push toward programmatic efficiency and transparency), it’s bringing the end points of the supply chain closer to each other, and helping them understand the real value of their partners.
What Does Supply Path Optimization Mean?
SPO is a means of identifying the most efficient path from the buyer — the DSP or agency trading desk — to their most valuable ad inventory, depending on the specific advertiser’s or campaign’s objectives.
SPO aims to locate where and how bids win programmatic auctions, and identify vendors that bring the most value, to help demonstrate programmatic ROI. From the sell side, DPO looks at how impressions are sold. Through these two processes, advertisers and publishers gain insights into each other’s goals, and how to better utilize their partners’ strengths.
By limiting bidding activities to a smaller number of sellers (SSPs and exchanges), buyers can gather deeper insights. SPO also sidelines unauthorized resellers, who may be engaging in fraudulent activity. That helps ensure quality control and brand safety for advertisers, reducing the chances of winning impressions on inappropriate sites.
How We Got To SPO
Understanding SPO starts with header bidding. Header bidding gave publishers new insights into the real value of their inventory, tightened relationships between publishers and their demand partners, and boosted publishers’ revenue. Indeed, header kicked off a new phase of advanced programmatic.
At the same time, header bidding became a considerable technological burden for DSPs. Previously, one impression would enter the programmatic market and garner any number of bids. After header bidding, the same ad impression would appear simultaneously from multiple sellers. Over the course of just a few years, the volume of ad impressions processed by a DSP expanded by over 500%, in some cases. With so many redundant impressions, a DSP could easily end up bidding against itself.
Meanwhile, publishers continued adding demand partners to their ad stacks, to increase revenue and fill, diversify demand, or meet other business goals. However, that strategy sometimes ropes in poorly-performing partners and resellers.
Somewhere in this mess were the impressions that mattered to each buyer, in the buyer’s preferred source and auction setup. So DSPs and agencies began plotting out the path bids made, to the point of winning an auction — and they began adjusting their relationships with other vendors accordingly.
How Supply Path Optimization Works, For Both Sides of The Auction
Different DSPs adopt different strategies — or different combinations thereof — for SPO. Manual analysis and algorithmic decision-making both play a part, per the DSP’s resources and needs. Automated methods differ based on the metrics the DSP is optimizing for. Also, while efficiency may be one of SPO’s top goals, “efficiency” looks slightly different to each buyer.
Win rate, spend per queries-per-second (QPS), intermediary costs, and latency are just the beginning of metrics that may be meaningful to a buyer. Others include sorting impressions based on their chance of winning the bid, focusing on SSPs and exchanges that offer second-price auctions, filtering out undesirable auction tactics, cutting out all resellers, or circumventing resellers with little or no unique supply.
Yielding Optimal Results
But without input from publishers and/or other vendors, buyers’ SPO efforts may not yield optimal results. Communication along the supply chain helps. As tangled as header and waterfall paths are, DSPs and agencies can make better sense of them by asking publishers who their preferred demand partners are, rather than trusting sellers will always make the right decisions by proxy.
Without SSP/exchange and publisher input, buyers are left to rely partly on what they can infer about their blind spots — the publisher’s waterfall structure, the nuances of a seller’s auction setup, and more. Also, publisher input can help buyers avoid supply path optimization strategies that introduce additional, inessential layers of tech. Sell-side input helps minimize educated guesswork, and helps buyers from inadvertently drawing out paths that are counterproductive to their own goals.
To proactively reduce supply-chain clutter, publishers should audit their ads.txt files and push their preferred demand partners to audit their sellers.json files. This will this improve improve transparency and verify authorized partners are delivering value, while helping buyers who would associate close partner integration with efficient path to impressions.
Where is SPO Taking Publishers, Adveritsers and Vendors
So, the next stage of this conversation among stakeholders on both sides is DPO. Publishers quickly realized they needed to be in this conversation as well, because not only were buyers doing SPO without them — so were SSPs and exchanges. Publishers need to make sure their impressions are going to their preferred partners, and to control the volume of impressions going to their lower-priority partners — whatever makes good business sense.
Publishers and advertisers should guide each other first-hand toward truly optimal results. That involves each side auditing its programmatic partners, underlining those who bring the most value, and learning about which of those partners delivers unique supply or demand.
Where Ad Quality Fits Into Supply Path Optimization
When it comes to ad quality, the uncomfortable truth is that as publishers continue to incorporate more demand partners, poorly-performing partners and even fraudulent demand continues to slip through the programmatic net. Together, the lack of transparency and collaboration between industry players has enabled malicious actors to successfully exploit the ecosystem– turning malvertising into a thriving enterprise.
Malicious actors successfully entering auctions and serving deceptive ads or viruses, is a leading reason premium publishers are losing their readership. Lost readership and accompanying dips in ad revenue are a prime example of what can go wrong when inventory is bought and sold with limited transparency– and without the proper ad quality controls in place. This is not a simple problem to solve, it’s technical and nuanced, but must be done, so how should publishers move forward?
Ad Quality, A Step Towards Transparency
Publishers can lead the charge towards transparency by elevating their detection and partnering with an ad quality vendor skilled at pinpoint detection – capable of tracking and blocking malicious or fraudulent actors across the ecosystem. Additionally, publishers can take a more proactive stance toward knowledge sharing by notifying SSPs about low quality, offensive or fraudulent ads. Providing SSPs with data about priority incidents is the first step towards effective cooperation and increased transparency. Publishers don’t have to do the heavy lifting themselves. When choosing an ad quality partner, vendors should provide these features to publishers– letting publishers rest easy.
While supply path optimization was initially supposed to benefit buyers, it can be beneficial to publishers — if publishers are able to advocate for themselves. And they are able: SPO and DPO are both important in providing transparency, strengthening business relationships, and helping both sides meet their goals. Indeed, SPO and DPO together illuminate the full supply chain, and boost advertiser ROI and publisher revenue along the way.