Back to Blogs
WHAT'S IN YOUR ADTECH TOOLKIT?: UNDERSTANDING SUPPLY PATH OPTIMISATION
By Aqilliz
Published on May 20, 2020
In 2019, Zenith’s report on Programmatic Marketing Forecasts estimated that global programmatic ad spend would surpass US$100 billion for the first time in its history with expected growth to reach US$120 billion in 2020. By 2021, 72 percent of all digital media will be programmatic. Such growth projections are unprecedented, especially when considering the fact that in 2015, programmatic ad spend was approximately valued at US$30 billion.
Throughout the past few years, programmatic’s enduring appeal among publishers and advertisers alike has stemmed from the promise of increased efficiency that it offered, yet today, systemic challenges remain. From inadequate privacy protections afforded to consumers to the threat of ad bots and ad fraud, the programmatic ecosystem has felt its share of growing pains.
Within a crowded adtech landscape that’s led to a rise in intermediaries across the digital media supply chain, how do you actually measure the value each party is bringing to the table? As marketers, are you able to actually see where your spend is really going?
These are some of the questions that Supply Path Optimisation aims to answer.
So, what’s Supply Path Optimisation (SPO) anyway?
To understand Supply Path Optimisation (SPO), we need to go back to the programmatic supply chain. If you’ve forgotten what the programmatic supply chain looks like and who’s involved, give our guide to programmatic another read. With the number of players involved, SPO can be described as the process of reducing intermediaries across the programmatic supply chain until you can be 100% certain that each one is adding value. This means that demand-side platforms (DSPs) effectively streamline how they interact with supply-side platforms (SSPs) for a given campaign in order to meet certain outcomes.
Still confused? Well, in the typical programmatic campaign, SSPs and DSPs help to facilitate the automated buying of ad space among advertisers and publishers. With that equation alone, it really boils down to standard economics of supply and demand. DSPs and agencies want as much access to inventory from as many SSPs as possible. Each SSP (ideally) has access to exclusive supply, so with more SSPs in your network, this should only mean more access to sellers.
Is the need for Supply Path Optimisation justified?
For sure. Today, publishers are now working with growing networks of SSPs and most of them don’t have exclusive inventory. Rather than increasing supply, working with more than one SSP simply means that you’re only clogging your supply chain with more intermediaries, resulting in significant process inefficiencies and cost redundancies. To mitigate this, SSPs have created new auction models in order to diversify their offerings to DSPs bidding for ad space.
One such example is header bidding, a tactic that enables publishers to maximise their ad inventory. Also known as advance bidding or pre-bidding, header bidding rose in popularity in 2016 and is largely regarded as the catalyst for why SPO came to the fore due to its unprecedented impact on DSPs. Essentially, header bidding allows publishers to offer inventory to multiple ad exchanges simultaneously before making calls to their ad servers. By allowing multiple sources to bid on the same inventory, they can increase their gains in the hopes of making more money.
However, this places a massive burden on DSPs due to a surge in bid requests. Rather than handling one bid request at the time, this surged to anywhere upwards of 10 or 20 from different exchanges. No longer limited to large, established ad exchanges, smaller exchanges came about, resulting in a duplication of impressions being bid on. For every bid request responded to, DSPs incur a cost and these costs can climb if DSPs are processing hundreds of millions or even billions of impressions per day. With bid duplication, DSPs end up purchasing the same ads multiple times which obviously only results in lost productivity and misused spend rather than revenue.
Isn’t this an issue of a lack of transparency?
It is, indeed.
Discussions on SPO have all but revealed the true extent to which the existing digital media supply chain on the SSP-Ad Exchange-DSP level is woefully opaque. With conflicting interests, each DSP will have its own definition and approach to achieving SPO. For some of them, it means further filtering for bids that are most relevant and that they have the highest chances of winning and for others, it means only limiting engagements with SSPs that apply second-price auctions which allows buyers to bid the true value of an impression.
But again, these are all manual processes that can often involve blacklisting and whitelisting exchanges and buyers on an adhoc basis or based on existing commercial relationships that afford different benefits. In fact, Tom Kershaw, CTO of The Rubicon Project argues that while SPO strategies have been effective, it’s been “a manual process of making cuts and tweaks to supply sources… [and] in an industry that’s doing billions of transactions an hour making changes manually doesn’t work. The more we do manually, the worse off we tend to be in adtech.”
To address this endemic problem, the Internet Advertising Bureau (IAB) Tech Lab introduced data-driven transparency tools such as sellers.json and the SupplyChain Object to display the actual source of an impression, in order for buyers to have a clearer understanding how an exchange gets its inventory. This can help DSPs make more informed decisions about which exchanges they ought to work with and which impressions should be paid for.
Aside from these innovations, adtech startups are beginning to explore the use of emerging technologies that can provide better assurances of provenance to bolster SPO approaches. Blockchain, for one, can be used to provide an end-to-end view of the impression lifecycle across a given campaign. With pre-encoded metrics in a smart contract, impressions can be validated to ensure that they verifiably ran through an ad server to the ad exchange and the DSP. Smart contracts can also validate whether the ad also ran on the bid that the advertiser won, going as granular as the intended format and placement. This helps to give buyers a full view of the performance of their impressions, but also the SSPs they’re choosing to work with, allowing them to better optimise their SPO strategy on an ongoing basis.
Through a data-driven approach that allows buyers to examine their impressions on a log-level, decisions surrounding which SSPs to work with and how wide one’s network ought to be, can be based on measurable results rather than arbitrary factors.
But it’s all about the long game
As the programmatic ecosystem continues to evolve, SPO strategies are likely to adapt in turn. Involving the consolidation and analysis of impressions at the most minute level and likelihood of repeated re-evaluation based on the performance of your SSP network, SPO is an ongoing effort. With the potential to ensure that your marketing dollars aren’t going to waste, we’d argue that it certainly merits more attention and time for the industry to explore real infrastructural changes rather than cosmetic fixes.