Supply Path Optimization: Transparency in Programmatic Advertising

Supply Path Optimization: Transparency in Programmatic Advertising

What is Supply Path Optimization (SPO)?

Over the years and ages of digital advertising, the process of trading inventory has become increasingly intricate and confusing for both demand and supply-side players. With the rise of ad fraud, black box reselling practices, and general ambiguity around the distribution of value in advertising, the need for transparency and control also rises.

In comes Supply Path Optimization, a range of tactics that programmatic buyers can implement to have greater control over their buying decisions and supply partners. Very often when demand partners are buying ad spaces programmatically, the paths taken to win an ad impression can sometimes result in duplicate auctions for the exact same impression. This can be due to either resellers or header bidding setups. SPO allows buyers to access a publisher’s inventory through the most direct route and came about to tackle ‘duplicative buying paths’ that followed with the adoption of header bidding. 

How to Implement a Strong SPO Strategy

One method of Supply Path Optimization utilizes dynamic algorithms to determine the cost and quality of certain inventory, as well as analyzing a publisher’s supply partners in real-time. These algorithms can help buyers to identify valuable impressions within a certain supply path. To have a successful SPO strategy, brands should analyze auction dynamics and apply the right approach to each auction, which will help to reduce overspending on certain inventory. Many buyers are choosing to opt for bid shading tools to help them determine the best price to pay for an ad impression and increase their return on ad spend (ROAS). 

Reviewing Your Supply Partners

Other buyers are consolidating media spend and strategically assessing their supply-side partners to remove those which are not adding incremental value. To check if a supply partner is selling quality inventory, buyers can look for direct publisher relationships or if the supply partner is working with a trusted fraud prevention company such as Pixalate or Fraudlogix. Another method is to ensure that partners are implementing ads.txt/app-ads.txt and sellers.json, as well as focusing on how viewability is measured. 

How Media Buyers Can Benefit From Supply Path Optimization

IAB’s ads/app-ads.txt, sellers.json, and SupplyChain Object mechanisms are beneficial to buyers wanting to identify and validate all links in the supply chain to confirm that they are authorized and that the inventory can be rightfully sold from publishers, SSPs, and exchanges. Ultimately, media buyers are looking for the most direct and cost-efficient route to access a publisher’s inventory. These processes allow demand-side platforms (DSPs) greater control over their supply path decisions, increases the transparency of pricing, and maximizes efficiency.

With buyers optimizing their supply relationships, how are publishers impacted?

SPO benefits the entire advertising ecosystem, as it helps to eliminate the bad players and wasteful requests/bids. Demand Path Optimization (DPO) techniques have also come into play, whereby publishers are optimizing the route from SSPs, ad networks, and exchanges towards the advertisers and their media buyers. Many publishers are examining where exactly their ad impressions are going and making decisions on whether these routes and partners are preferred and if they can expand those pathways. Like SPO does on the demand side, DPO increases the amount of control for publishers, maximizing revenue, and allows supply-side partners to get a better understanding of the inventory buyers are looking for.

How Does Demand Path Optimization Work?

Many publishers employ DPO techniques by assessing data such as win rates and bid response times to identify their best buyers, allowing sellers to really bring value to the demand side as they can help them to make more informed decisions on which inventory to bid on. This results in more committed buyers and also strengthens brand safety as the paths are visible and verified for trusted partners.

Auctions can be carried out much faster with demand-path optimization in place, benefiting publishers with reduced latency and improving user experience. Demand and Supply Path Optimization processes are advantageous for all players involved and contribute to a more “harmonious ecosystem”. 

How Do SPO and DPO Differ? 

Although similar umbrella terms, SPO and DPO differ as the latter places a focus on how ads and impressions are sold whereas supply-path optimization is concerned with “how impressions are acquired to eliminate technologies or non-essential resellers with the verified log-level data” in order to find the most direct and efficient route possible. In the short term, these processes may seem to decrease yield because of less duplicate bids on the same impressions/artificial bid density increase, but as the value chain becomes more transparent, more money is being invested in order to generate more ROI and ROAS.

Looking Towards a More Transparent Landscape

With SPO (and DPO) becoming more common practices for AdTech companies, the goals for a more transparent and efficient advertising landscape are becoming realized. These methods, along with anti-fraud initiatives such as app-ads.txt/ads.txt and sellers.json, the ecosystem is shifting and trusted relationships are increasingly on the rise between demand and supply-side players. 

PubNative, along with Applift and Verve, is now part of Verve Group, a data-first brand performance ad platform that strives to create an open and transparent mobile advertising ecosystem. Get in touch below to find out more about our joint offering.

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