With automation, programmatic has redefined digital advertising, but supply path optimization is what currently reshapes programmatic. 

When programmatic appeared, it became possible to process tremendous arrays of data, define optimal placements for ads, and serve them to the targeted audiences in a fraction of a second. Still, it entailed new challenges: too many variabilities and unknowns that influence the operation of various mechanisms and, thus, media-buying effectiveness. 

We used to think in the auction we have one ad and several bids that compete for that ad. In recent years, however, the programmatic environment became uber complex. Duplication of auction events took the market away from the natural auction dynamics when publishers massively shifted to header-bidding

The same ad impression could be auctioned through multiple sell-side platforms at the same time. This means that the same impression can reach DSP via various paths. Meanwhile, DSPs can see an increased number of bid requests and QPS (queries per second) and often end up competing against themselves in multiple auctions. Supply path optimization came up as a perfect solution that tames and organizes the chaos.
 

auction duplication

What is supply path optimization?

Supply path optimization is a specialized algorithm used by the demand-side platform to define the bids with the shortest and most effective paths to the impression. As a result, after application demand, partners receive the ability to single out only the most optimal and beneficial bids while supply partners/SSPs still achieve their highest revenues. 

How supply path optimization works

Demand-side platforms can use different supply-path optimization strategies. Some of these may include specific mechanisms that sort out only the bids that have 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 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 it is essential for DSP. Benefits for advertisers

First and foremost, with SPO DSPs will finally escape the problem of bid duplication associated with multiple auction formats applied by SSPs that use header-bidding. This will turn media-buying into a more efficient and clear process. The values that advertisers can unleash with SPO are much broader:

Economic Control

If you are a buyer and you’re buying from hundreds and hundreds of SSPs you really have little to no control over the supply chain. SPO delivers more transparency when it comes to fees as well as the quality of inventory: who is sourcing what type of inventory, how they are sourcing it, whether it is a direct or indirect sale, all these nuances will be taken into account. 

Quality control

Brand safety is still a significant concern for DSP. No advertiser wants their ads to appear near inappropriate content. Advertising fraud appears because some SSPs accept inventory from unauthorized resellers that can appear to be bad actors. Supply path optimization in programmatic will help to identify secure inventory and sort out those that don’t meet the desired criteria.

Less complexity, more insights

Buyers and sellers can take part in numerous auctions daily. Each supply partner or SSP at the chain adds an additional layer of complexity in auction dynamics. When spend is getting consolidated on certain programmatic partners, advertisers obtain essential insights that are furtherly used for campaign optimization and improvement.

Why it is important for SSP. Benefits for publishers

The digital advertising ecosystem is interconnected, so in the long run, what works well for advertisers also works well for publishers. With a robust supply-path optimization, a good quality supply-side platform receives more benefits via media spend redistribution, which then translates into higher yields. 

  • Redistributed media spend. With SPO highest yields will come to the publishers that offer excellent inventory quality as the incomes will flow away from bad actors who use manipulative and fraudulent tactics. 
  • Higher yields. For the publishers, path optimization is a chance to get a naturally competitive demand for their inventory. In such circumstances, publishers that feature unique inventory have much higher chances to enhance the value of it and receive more yield from media-selling. 
  • Enhanced fill rates. Taking essential steps from their side, SSPs enhance media-trading conditions for publishers. SSPs should track the paths of how the publisher’s inventory reaches the buyers and make the utmost to improve these paths because, in the end, it will always impact fill rates of their publishers. 

Challenges

So far, auction duplication has been mostly affecting web inventory so that supply path optimization is currently limited only to this environment. Since technology evolves, it is only a matter of time when the same issues hit mobile apps and connected TV

The other challenge is SPO navigation - defining how to find the best possible optimized route for each brand. Sure, DSPs are the best problem solvers when it comes to campaign optimization. Nevertheless, it may take years until DSPs learn how to deliver highly-customized SPO strategies to suit individual advertiser’s KPI better. 

What’s next? 

Supply path optimization is already changing how buyers and sellers collaborate at the vast programmatic landscape. In the future, this trend will tightly bind together new advertising mediums and best industry practices to establish progressive ad tech standards. Ad tech platforms will work side by side to identify where they can make improvements or changes, no matter what it is a simple ads.cert implementation or rethinking entire transaction mechanics.

In SmartyAds DSP, we’ve created a unique supply path optimization that works hand-in-hand with header-bidding technology. When the buyers are transacting over SmartyAds demand-side platform, we guarantee the shortest path to the impression that overcomes issues with latency and QPS load. The secure full-stack ecosystem delivers transparency of pricing and auction dynamics. The proprietary bid manager analyzes win and traffic patterns in real-time and gives preference to the most relevant bids featuring the highest likelihood of winning. 

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

Written by
IRINA KOVALENKO, CMO OF SMARTYADS
December 2019