‘A clean, unadulterated supply chain’: The Trade Desk on a year into its OpenPath direct deals with publishers

First, there was the initial furore over the move — the kind that always happens whenever a company is deemed to have encroached on another’s turf. In this instance, observers thought the Trade Desk was coming after those companies that already help publishers sell impressions to advertisers. 

Then came the intrigue — the sort that can only really happen when execs think the rewards outweigh the risks. The rewards being even more programmatic ad dollars from what is probably the second largest source of them for publishers in The Trade Desk.

So far, the intrigue has overshadowed the furore. 

OpenPath is not only being used by some of the most recognizable brands in publishing, it’s also being used by some of the most visited ones too. The ones that don’t fit into either category don’t fit into this plan. In other words, OpenPath is quickly becoming a direct link to strategically important publishers for The Trade Desk.

“It’s really allowed us to see what a clean, unadulterated supply chain can look like,” said Will Doherty, vp of inventory development at The Trade Desk, who has been leading the rollout of OpenPath over the last year. 

That “clean, unadulterated” connection he mentioned refers to the fact that OpenPath is a way for advertisers to buy impressions via fewer ad tech middlemen. The fewer intermediaries there are, the fewer that will take a cut of programmatic spending that would otherwise have gone to publishers. And the more this happens the more bidding power on the advertiser side. More bidding power means advertisers have more money to make competitive bids — which is obviously good for publishers.

That’s the crux of OpenPath’s pitch: it’s an additional bid from The Trade Desk without the intermediaries. As Doherty explained: “OpenPath has been a source of incrementality for our publishers, which was one of its original intentions. It was about doing something incremental for those publishers who felt there wasn’t a lot of unique demand in the market.”

Publishers just have to pay a single-fee for the privilege of getting that demand. The ones who have, for now at least, are seeing the benefits.

Take Cafe Media. The company, which handles monetization operations for independent publishers, has been selling impressions with OpenPath, has characterized the benefits of it as “really good’, said Paul Bannister, chief strategy officer at Cafe Media.

“One of the key ways we measure performance of any partner we work with is through incrementality,” he added. “Like, how much more money are we making than we would have made had we not had this relationship… OpenPath started out [improving] in moderate increments, like good, not amazing, but it has grown a lot over time.”

Bannister also informed Digiday that OpenPath is not the only means by which The Trade Desk spends budgets with Café Media, adding that it still receives demand from the DSP via more traditional routes such as Magnite, PubMatic, or TripleLift. He added, “Obviously, it changes over time, but OpenPath doesn’t dominate how The Trade Desk operates, at this point it’s far less than 50%.”

That could change, of course. In fact, it already is for some publishers. They’ve noticed that OpenPath is starting to become one of the dominant ways The Trade Desk likes to buy impressions from them. It isn’t, however, the dominant way it likes to buy from them. And Doherty is adamant that this isn’t the plan. 

“We don’t operate an SSP nor do we provide yield management tools because we’re not in the business of serving publishers,” he said. But the ubiquity of Prebid has made our ability to bid directly into a publisher somewhat trivial. So the efficiency of doing that, and the logic of it becomes self-evident over time.”

But that doesn’t mean OpenPath will go easy on those ad tech vendors publishers use to sell their impressions to advertisers. On the contrary, it’s clear that those ad tech vendors that aggregate supply from other aggregators, rather than from publishers directly, are in its sights. Doherty expanded on the point: ”OpenPath has validated those partners and SSPs that had been doing things by the book.”

Here’s how it does this: The Trade Desk spends a big chunk of its ad dollars through those ad tech vendors and publishers it deems efficient. Its decision is dependent on several factors including win rate and price. Anything that doesn’t meet those criteria is deprioritized. All The Trade Desk cares about is that it can buy inventory at a fair price through that path.

And therein lies the rub. For now, this ruthless streak is fine because it’s not really costing publishers. Eventually, it could. Or at least that’s how the cynics see it. And if this happens, expect more chatter around whether The Trade Desk has created a structure that allows OpenPath aggregate advertiser demand a lot faster than some of its competitors. Indeed, it’s a lot easier to do this if the ad ad tech vendor knows the ranking factors to win those dollars when no one else does.

“I think it’s healthy for the industry and publishers in particular to operate with a trust but verify mentality,” said Doherty. “I would love for everybody to take us at our word, but we always knew that it was going to take time to get these integrations live to actually show people, not just tell them, what we’re going to do. That was always going to carry more weight than just about anything else we could have done.”

“Publishers would be well suited to get trained on what is called a BATNA — ‘Best Alternative To A Negotiated Agreement’,” said Tom Triscari, an economist at consulting firm Lemonade Projects. “When they do, they’ll stop making decisions today that they end up regretting later on. With that in mind, they would also be well served thinking in terms of a 10 year plan vs a 1 year plan. Doing a deal with TTD or anyone other adtech player should be thought of in this light or else regret will likely follow. Caveat emptor.”

Historic precedent 

OpenPath was hardly the industry’s first direct integration between a demand-side platform and publishers’ inventory. 

After all, Criteo and the Yahoo DSP teams had already broken this ground, according to several sources, some of who note that any party that essentially “crosses the aisle” generates a degree of skepticism from industry onlookers.

Early OpenPath partners report a degree of antipathy among publishers, some of whom were wary of The Trade Desk’s incentive to erode their CPM prices.

Café Media’s Bannister compares the shifting tectonic plates of the ad tech sector to how dynamics in the logistics and shipping sector have altered over the years. 

For example, in the early years of Amazon, the e-commerce giant worked with shipping companies such as UPS and FedEx, but over the years Amazon has opted for more vertical integration believing this can better service its customer base.

“When you think about that process and evaluate all the different options, you think about ‘where are the different places I can make money?’ And in the case of our industry, there’s the case of lots of SSPs and DSPs becoming less differentiated for different reasons,” explained one source who requested anonymity.  

“And they’re also charging high fees, so you have some people thinking about how to simplify that, and recapture some of those high fees and make things more efficient for our end-customers… it’s part of a bigger narrative, and part of a natural progression,” the source said.