The state of supply-path optimization
Header bidding is wreaking havoc on programmatic platforms that are trying to cut costs amid an explosion in bid requests.
To cut infrastructure costs, demand-side platforms are turning to a new piece of ad tech jargon called “supply-path optimization,” which is a technology that uses algorithms to select bids that have the highest chance of winning auctions. By increasing the probability that a given bid will win its auction, SPO helps buyers avoid impressions they’re unlikely to win, supply-side platforms that depend on reselling and duplicative inventory. SPO aims to make DSPs more efficient in how they bid, which will help them lower costs and avoid shady SSPs.
Here’s what you need to know about the state of SPO.
The key numbers
- Just two years ago, header bidding was a niche concept that only a few publishers used. Today, 72 percent of publishers who sell their inventory programmatically use it, according to ServerBid.
- Back in 2014, buying platforms Turn and The Trade Desk processed about 1 million impressions per second. At the end of last year, Turn processed about 4.5 million impressions per second, and The Trade Desk processed 5.7 million impressions per second.
- Rocket Fuel wouldn’t provide raw numbers, but it said that it has used SPO to reduce the number of impressions it processes per second by up to 30 percent.
- About half of the inventory on AppNexus is duplicative, said a company spokesperson. To circumvent the redundancy, the company used SPO on 20 percent of its inventory at the start of the year. Today, the company uses SPO on 48 percent of its inventory.
- In July, Rubicon Project acquired nToggle for $38.5 million with the intent of using nToggle’s machine learning capabilities to determine which impressions it should avoid bidding on to reduce infrastructure costs.
The buy-side view
Most advertisers want their money to wind up in the hands of content creators, not middlemen. Since SPO brings DSPs and SSPs closer together, it theoretically could reduce ad tech taxes in the byzantine digital ad-supply chain, said Rich Sobel, svp of programs and services at Publicis Media.
Reps from buy-side platforms Adobe, Sonobi and The Trade Desk said SPO will make it harder for nontransparent SSPs that rely on arbitrage to stay in business.
The sell-side view
There is little differentiation among many ad tech platforms. The new algorithms that DSPs use to place bids might bring clarity to which middlemen add value and which ones do not, said Samuel Jenning, an ad tech specialist at Disney/ABC Television Group.
“Long term, it should work to publishers’ advantage, as [SPO] will move demand from SSPs that take too much of a cut to those that give most of the money to the publisher,” said Purch CTO John Potter.
What it means for the industry
Just as header bidding was publishers’ response to Google’s ad server favoring its own exchange, SPO is the ad buyer response to stresses like duplicative inventory that header bidding exacerbated. Since SPO can help buyers avoid ad networks and SSPs who specialize in arbitrage, it could lead to a culling of shady vendors, which would ultimately shift ad dollars from middlemen to publishers, said Nathan Woodman, svp of strategic development at ad tech firm Iponweb, which uses SPO to help DSPs avoid bidding against themselves and SSPs with unclear auction dynamics.
“It’s a treatment that can benefit the whole ecosystem,” Woodman said. “The media spend running through [exchanges] remains constant, but the [ad dollars] will get redistributed to the companies that have unique inventory.”
‘More dollars to experiential’: Why Walmart is still using experiential marketing to pitch Walmart+ — even during coronavirus crisis
The company is working with influencers and media partners to bring some of the missed “special moments” that had been canceled throughout 2020 to life.
Member Exclusive‘Don’t have the luxury of doing good’: The age of dissonance continues at this year’s ANAs — and beyond
When there’s an on-going global pandemic that’s crippling whole brand categories, it was hard to hear the CMOs speaking at the ANAs.
Twitch emerges as rising platform for beauty brands
Twitch’s over 17.5 million daily active users are gaining growing attention from companies well beyond the traditional gaming world.
SponsoredPublishers must strengthen their relationships with brands and customers
Zara Erismann, MD Publisher EU, LiveRamp In today’s market of tightening data regulations — and with the end of third-party cookies now around the corner — it is critical that publishers focus on optimizing their data strategies to ensure and strengthen close relationships with their audience. In a recent report, The State of Publishing: Monetizing […]
‘Show we’re listening’: Why agencies are lending office furniture, offering WiFi stipends to employees as new pandemic-era perks
With a hybrid reality in the offing, rethinking perks to include ways to make working from home better for employees has become a focus for leaders.
‘Shopping patterns will feel longer and flatter’: Gap’s CMO on preparing for holiday campaigns
Mary Alderete on the upended marketing calendar and Gap’s plans to lean into the extended holiday season this year.