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How advertisers are creating supply-side strategies

Advertisers have gone from being blissfully unaware of shady ad exchanges to using ad tech to buy from only the ones they trust.

The shift is happening with the larger, more sophisticated advertisers who realized following this summer’s bid-caching scandal that if they understand how ad exchanges auction impressions, they can buy through the most cost-efficient marketplaces, said Chris Kane, founder of programmatic consultancy Jounce Media. He said some of the consultancy’s clients are testing whether demand-side platforms can use algorithms to select bids that have the highest chance of winning programmatic auctions via exchanges they trust, a trend otherwise known as supply-path optimization.

Deutsche Telekom is tweaking its own ad tech strategy to understand the path to the most efficient auctions on ad exchanges. It wants to use multiple DSPs to buy from ad exchanges, but only if it can find a way to avoid bidding on the same inventory. Doing so would allow Deutsche Telekom to find the most efficient way to win bids with minimum cost, which is something its current DSP Adform is exploring.

The DSP is building what it calls a supply-path optimizer that chief strategy officer Jochen Schlosser said will let advertisers and agencies setup their own marketplaces based on its DSP and supply-side platform ad technologies. Ad buyers will be able to use Adform’s SPO algorithms to create a preferred path to impressions through regular private marketplaces and other exchanges based on how they want to optimize campaigns. For example, an advertiser could configure minimum acceptable viewability thresholds and not buy impressions below this minimum or set its required brand-safety filters via a third-party vendor when building their own marketplace with Adform.

“The end result is more of an economical buy than buying in a traditional PMP, an open exchange or a combination of both, where costs would need to be made for issues such as the exchange, avoidance of fraud and viewability,” said Schlosser.

Not all DSPs will play nice with ad exchanges in their bid to give ad buyers the optimal route to ads. Some DSPs, particularly, the larger ones, are circumventing those parts of the supply chain altogether. Criteo, for example, is directly integrated with 31 percent of 2,000 of the largest global websites as reported by Alexa, according to Jounce. More DSPs are expected to follow this route in 2019.

“One of the things to watch out for in 2019 is how DSPs will split,” said one ad tech executive on condition of anonymity out of concern of jeopardizing commercial deals. “There are those DSPs that bid through the exchanges and are dealing with complexity around infrastructure that’s pushing up prices, and there are those that aren’t picking favorite exchanges and are going direct to publishers instead.”

GlaxoSmithKline is going for the latter strategy with its ad tech. The advertiser folded its ad tech into Google earlier this year and now uses the DoubleClick Bid Manager DSP to buy impressions from the DoubleClick AdX ad exchange.

GsK wanted to secure the optimal supply path for every publisher on its media plan and decided it would be more effective to do so via the Adex ad exchange, said an agency executive with knowledge of the plan. Centralizing the license directly with Google theoretically gives GsK transparency into all bids passing through the technology firm’s platforms. Previously, the advertiser had local teams using different DSPs of which the licenses were owned by its local agencies, leading to a lack of ownership to those platforms.

“Advertisers thought that header bidding was mostly about DSP infrastructure costs that didn’t really impact them,” said Kane. “It’s only now that those same advertisers are realizing that aside from the infrastructure costs of buying from multiple ad exchanges, there are price inefficiencies in those technologies that savvy buyers can exploit to achieve better economics.”

Nevertheless, the evolution of these strategies is likely to be slow as it will require participation from all principles in the supply chain. Agencies hold the ad budgets and so will need to be the drivers of the change by putting pressure on publishers and ad tech partners to make their inventory available for curation through specialized platforms.

Ad tech developer Iponweb is partnering with agencies to build tools that curate inventory and allow ad buyers to use auction data to spot when variations in the fees and auction dynamics of ad exchanges create pricing inefficiencies. Publishers often award impressions to a low-price bidder even when higher bids have been made, for example. Getting that insight will be predicated on the strategic alliances agencies broker with preferred ad exchanges so that they can get access to auction data and, therefore, get closer to publishers.

“Ongoing issues in the programmatic supply chain, like hidden fees and inventory quality, and new ones, like bid caching, are compelling many agencies to re-assert their proximity to supply partners,” said Joe Meehan, gm for Iponweb in North America. “By taking a more active role in supply curation and bringing their own intelligence and data science to the bid-stream, agencies are able to create differentiated buying strategies for clients that deliver real business outcomes.”

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