We were trying to find an analogy that matches perfectly with what supply path optimization (SPO) offers. The truth is that there are some things like SPO, but, actually, there’s nothing like SPO. For example: Maybe it’s like changing concrete walls for glass walls in an office, if those came with improved trust, boosted experiences, and enhanced earnings for granted. In this article, we’re going to delve into why we think SPO is unique for those who want to make the most of their ad inventory.
You might be wondering what SPO exactly is. So, before we get started, here’s a brief definition we’re going to come back to later: whether you think about it as a skill, a dynamic model, or as a process, the aim of embracing SPO is to make the bidding process more transparent, reduce path duplication, and improve advertising outcomes. It’s mostly about showing the right ad to the right user on the right publisher—and, of course, at the right price.
According to a survey by PubliMatic and Digiday cited in an Interactive Advertising Bureau (IAB ) guide, almost 90% of brands, agencies, and DSPs are actively implementing SPO. Plus, when they choose their SSP partner for SPO purposes, their most important decision drivers are private marketplace capabilities and brand fraud and safety controls. Why would they be concerned about factors like real-time auctions, fraud, and safety? We have to go back in history to answer that.
How it all started: Waterfall and header bidding
Remember the idiom “Too many cooks in the kitchen”? Spoiler alert: The recent history of bidding ends quite like that. Let’s start at the beginning when publishers and agencies used to communicate directly to sell and buy ad spaces. Although it was transparent, it was really hard to scale and the supply side didn’t always sell its full inventory.
Waterfall: good for holidays, not that good for programmatic advertising
It was in the mid-2000s when we said hello to a brand new solution: Programmatic Advertising. This helped advertisers personalize and pick their audience, and publishers sell almost all of their inventory. Personalizing audiences and inventory sell-outs sound great, but the setup was not that great at first. To better understand the waterfall setup, we should picture our main programmatic partners at the top—the one that spends the most—and then a scale with an order defined by how much the others have bid in the past.
The thing is that programmatic buyers don’t always spend the same, right? In this setup, the main problem was that publishers were losing money, because maybe the second or even the fourth buyer in the scale was willing to pay more than the first one. Plus, probably many of those buyers felt disappointed and stopped bidding, causing limited competition.
Another problem was that some publishers used ad servers owned by companies that also were in the programmatic exchange’s business. Therefore, those organizations tend to cover their demand first. We may be guessing: Couldn’t publishers just check for themselves if those companies were selling their inventory in their own exchange at unfair rates? The answer was no. As we see, it’s better to leave waterfalls just for our next vacation.
Header bidding: Too many routes for the same destination
Around 2016, the programmatic ecosystem welcomed a new setup made to solve mainly the transparency and loss of money issues that were on publishers’ minds. That’s our dearest header bidding. This gave publishers the power to reach out to more exchanges, they got more advertiser bids, improved fill rates, and boosted sources of revenue. The most important thing is that the hierarchical model of the waterfall setup was left behind.
How was it possible? On one side, publishers were able to make ad calls to all of their demand partners and source their bids all at once, on the other one, publishers’ demand partners competed against each other in real-time. Now we have another potential problem: Publishers sending their ad requests to different SSPs, and those SSPs forwarding them to the same DSPs. Well, it wasn’t potential, it was what really happened.
Every partner got a chance to participate, which solved one of our waterfall’s issues, but now the problem was multiplying ad requests, often with different prices. It seems like in header bidding, all the roads don’t lead to Rome but the same publisher inventory. Time only multiplied the problems: marketers lost sight of their budget, the partnerships they had, and the publishers their ads were on. Plus, here’s a gift for the statistics fans: A few years after header bidding was adopted, PwC and ISBA published a study that revealed that publishers, on average, received half of the advertiser spend.
Why have we made this throwback to the recent history of bidding? Because it was the main reason why SPO was born, addressing the new needs and solving the issues header bidding caused.
How it’s going: SPO
SPO helps publishers reduce their routes and match with the best advertiser. This requires transparency not only of the bidding process but also of its whole dynamic and fees. With SPO decision-making, it’s a win-win: marketers are making the most of their programmatic dollars and publishers keep improving their value to customers. Let’s jump into SPO’s benefits to get to know it better.
Benefits of having an SPO approach
Yes, SPO empowers publishers to smooth their selling paths and buyers to ease their buying paths, with, for instance, transactions free from artificial costs, but it also offers other kinds of benefits. When we decide to embrace an SPO strategy, there are some winnings that, according to the IAB, it unlocks:
Improved economic control: SPO enables transparency into SSPs’ fees, auctions’ dynamics, and the direct connections with publishers.
Enhanced quality control: For example, including into the strategy the key of making sure publishers include factors like the presence of an Ads.txt file, helps buyers boost fraud reduction. In that sense, buyers have the power to choose to only work with good players and reduce the number of exchanges they trade.
Meaningful insights: The fewer programmatic partners we work with, the more game-changing insights we’ll get. That’s because buyers will be able to get meaningful data to fuel their decision-making, an extra value that helps them decide if they’re relying on the right publisher for them.
Boosted innovation: Thanks to strengthened partnerships with SSPs, buyers and suppliers can better focus on ad tech to create tailored technology.
Custom buying: As buyers reduce their SSPs connections, they are empowered to streamline partnerships and negotiate prices that create better value for buyers and sellers.
SPO is then about designing a strategy that ensures all the information will be available for buyers to choose the best route to connect with the right publisher and the right audience.
Ready to start your own? At E-Planning we’re all set to smooth your journey towards an SPO strategy that helps you leverage your ad inventory from the bottom to the top.