Since the introduction of header bidding, the programmatic industry has witnessed an increase in auction duplication.

The same ad impression can be auctioned on multiple sell-side platforms. It suggests that the same ad impression is delivered to the DSP via different paths.

Within programmatic, that traditionally meant that DSPs and agencies sought to access inventory from as many supply-side platforms (SSPs) as possible.

Meanwhile, DSPs and agencies face increased bids in ad exchange and QPS (queries per second) and often end up competing against themselves in multiple auctions.

auction duplication

However, the introduction of SPO brought a solution to this problem.

Together with demand-side platforms (DSPs) — the sell side's simultaneous push toward programmatic efficiency and transparency — the sell-side platform is bringing the publisher and the advertiser, the endpoints of the digital supply chain, closer together.

It's about creating direct connections, consolidating spend, and helping each side understand the value of their partners.

Research shows that 87% of brands, agencies, and DSPs actively implement SPO, mentioning brand safety, reduced ad fraud, and improved ad revenue as the key benefits. The absence of hidden fees is also one of the advantages that SPO brings to the table.

It is a direct CTA for all ad tech industry stakeholders to adopt SPO as one of their core business functions.

So, let's focus on what SPO is, how it works, and its benefits for publishers and advertisers.

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What is SPO supply path optimization?

SPO is a specialized algorithm the demand-side platform uses to determine the bids with the shortest and most efficient connections to the impression.

It aims to locate where and how bids win programmatic auctions and identify vendors with the highest yield to help demonstrate programmatic ROI.

The supply path optimization in programmatic helps the ad process to be efficient and transparent for buyers and sellers.

Let's see the mechanics of bid requests in SPO

So, how does the supply route affect the cost of an ad? The mechanics of this process you can see below:

mechanics of bid requests in SPO

How does supply path optimization work?

DSPs can use different supply-path optimization strategies.

Some of these may include specific mechanisms that sort out only the bids with the highest chance of winning (according to specific parameters).

The others reduce the number of SSPs that don't allow DSPs to participate in second-price auctions.

They evaluate the publisher's SSP partners, analyze win and traffic patterns in real time, and recognize SSPs with aggressive auction tactics to make a decision.

supply path optimization

Why should advertisers care about SPO?

With SPO, DSPs will finally escape the problem of bid request duplication associated with multiple auction formats applied by SSPs that use header bidding.

It will turn media buying more efficient and clear. The unique value that advertisers can unleash with SPO:

Economic Control

It delivers transparency when it comes to fees as well as the quality of inventory in header bidding: who is sourcing what type of inventory, how they are sourcing it, and whether it is a direct or indirect sale, etc.

Quality control

Ad fraud appears because some SSPs accept ad inventory from unauthorized resellers companies that can appear to be bad actors. A "reseller" means the exchange is authorized to sell the inventory but pays the "direct" seller, which is typically another exchange or ad server that has a contractual relationship with the publisher.

Supply path optimization will help to identify secure ad inventory in ad exchange and sort out those that don't meet the desired criteria.

So far, auction duplication has been mostly affecting web inventory. Since technology evolves, it is only a matter of time before the same issues hit mobile apps and connected TV. That's why SPO will also be important for those mediums as well.

Less complexity, more insights

Media buyers and publishers can take part in the SPO auctions daily. Each exclusive supply, partner, direct seller, or SSP at the exclusive supply chain adds value and an additional layer of complexity in auction dynamics.

When buyer's ad spend is consolidated on certain programmatic advertising partners, media buyers obtain direct access to essential insights that are further used for campaign optimization and improvement.

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Why should publishers care about SPO?

The digital advertising and publisher revenue ecosystem is interconnected, so in the long run, what works well for media buyers also works well for publishers.

With robust supply-path optimization, a good supply-side platform receives more benefits via media spend redistribution, which translates into higher yields.

  • Redistributed media spend. The highest yields will come to the publishers that offer excellent ad space quality as the incomes will flow away from a bad actor who uses manipulative and fraudulent tactics;
  • Higher yields. Path optimization is a chance for publishers to get a naturally competitive demand for their inventory with high fees. In such circumstances, publishers that feature unique inventory have much higher chances to enhance their value of it and receive more yield from media-selling;
  • Enhanced fill rates. SSPs should track the paths of how the publisher's inventory reaches the purchasers and do the utmost to improve these paths because, in the end, it will always impact the fill rates of their publishers.

Below you can see the main objectives that typically push media buyers and sellers to implement SPO:

main objectives when implementing spo

Wrapping it up

SPO is already changing how buyers and sellers collaborate in the vast programmatic landscape.

In the future, ad tech platforms will work side by side to make industry standards and identify where they can make improvements, no matter whether it is a simple ads.cert implementation or rethinking entire transaction mechanics.

When the buyer transacts our demand-side platform, we guarantee them the shortest path to the impression.

The secure full-stack exchange ecosystem delivers transparency of exchange pricing.

The proprietary bid manager analyzes win and traffic patterns in real time and gives preference to the most relevant bid featuring the highest likelihood of winning.

Have confidence in your supply chain optimization. Register at SmartyAds DSP or join a trusted publisher network at SmartyAds SSP.

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