Supply-Path Optimisation (SPO) is a consolidated view of the programmatic advertising supply chain that cuts unnecessary intermediaries between the advertiser and publisher, increasing the transparency in transactions.
Though information is power in the programmatic advertising space, automation of systems has created a double-edged sword. On one end, it automates tasks and delivers results in a fraction of a second but on the other it acts as a blackbox of data that has been causing duplication of bids, giving space to fraudulent players and led to ineffective use of ad spends.
A little history; when programmatic appeared, it was a milestone for the publisher and advertiser in equal parts. It automated the engine to a point where it became possible to process a tremendous amount of data, define optimal placements for ads and serve them to the targeted audiences in a fraction of a second. It followed an auction format that let several bids compete for an ad; the highest bid would win.
Over time, with new players in the ad exchange market, the programmatic environment became more complex. Duplication of auction events took the market away from the natural auction dynamics and publishers shifted to header-bidding. An advanced programmatic technique, header bidding introduced the pre-bid where publishers could offer inventory to multiple ad exchanges at the same time before making calls to their ad servers (Google’s DoubleClick being the most famous).
The idea was to let multiple demand sources bid on the same ad inventory at the same time. That way, publishers were able to increase their yield. Before programmatic header bidding was introduced, ad space was auctioned off and delivered only once the ad placements began to load on a webpage.
The programmatic pipeline
The difference is stark. In general, direct-sold inventory takes precedence over any programmatically sold options. Next, available inventory is served through the site’s ad server in a waterfall sequence, meaning unsold inventory is offered first to the top-ranked ad exchange. Following this, whatever is still unsold is passed along to the second ad exchange, and so the process goes. The rankings are usually determined by size. But it’s not always that the biggest ones are willing to pay the highest price.
The downside is that the same ad impression could be auctioned through multiple sell-side platforms simultaneously. This means that the same impression can reach DSP via various paths. This leads to a situation where DSPs see an increased number of bid requests and QPS (queries per second). However, they end up competing against themselves in multiple auctions. Supply path optimisation offers a solution to tame this chaos.
Enter supply path optimisation
SPO gives media buyers the ability to bid on and win inventory at the most reasonable price. On the other side, it lets publishers maximise their revenue over the long run. The SPO aims to create the most direct, trusted, verified and efficient paths to the publisher’s inventory. As a result, it reduces the number of supply-side platforms (SSP), ad exchanges and other supply partners that it works with. Fewer middlemen means less waste. This move works in reducing the duplication of supply across partners by shortening the chain.
Some SSPs (like Index Exchange and SpotX) process inventory algorithmically. The algorithm predicts which impressions will be relevant to send to each DSPs. Before starting out, it’s advisable to conduct an audit to identify all of the suppliers by name, list down charges, fees and costs for each supplier and establish what measurement data is available to track each supplier.
There have been industry initiatives towards supply-path optimisation, such as Ads.txt, a text file that sits in the publisher’s domain and acts as a list of all vendors that are authorised to sell the inventory. Sellers.json is the SSP’s version of the Ads.txt file. It lists the resellers authorised by the SSPs.
According to PubMatic’s cloud infrastructure platform for digital advertising, the benefits of an SPO include;
- Transparency on price – SPO can extend the impact of a buyer’s ad spend by ensuring transparency into the fees that various SSPs charge. It impacts the efficiency and effectiveness of the technology provider’s auction dynamics, the level of direct connections with publishers, and whether the SSP is willing to offer buyers preferential rates for consolidating spend.
- Curbs on fraud – Quality control is difficult since fraudulent bids can go unchecked. Advertising on bad quality websites can damage a brand’s reputation. SPOs operate greater control over such publishers making it to the auction to begin with.
- More meaningful partnerships – When each SSP integrates with over 100 DSPs, and each DSP, in turn, works with over 100 agencies, collaborative product innovation is difficult at best. By forging meaningful partnerships with SSPs, agencies can influence the product roadmap and SSPs are incentivised to build custom technology. Moreover, by rewarding supply partners that continually act in accordance with their interests, buyers can positively impact advertiser ROI.
- Holistic Insights – Understanding one programmatic SSP auction is difficult. Each additional SSP auction analysed adds exponential complexity. By consolidating spend on fewer programmatic partners, buyers can obtain visibility and leverage available insights to improve their business efforts.
SPO is becoming one of the top priorities of the industry. As per a study, 45 per cent of the buyers are actively implementing SPO. The most significant objective for the buyers is to reduce the fees. About 56 per cent of buyers believe that SPO has reduced fraud and brand safety issues and another 46 per cent have seen improved KPIs. Brands can use their ad spends to do more.
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