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Supply Path Optimization Paves the Way for Smarter Programmatic Ad Spend

Supply Path Optimization (SPO): What Is It and Why Is It a Big Deal for Programmatic Ads?

Decades after the first advertising network went live, it’s reasonable to conclude that the ad tech and programmatic landscape would have things figured out; new developments and innovations would be few and far between.

That’s not the case.

After all this time, new ad technology is still rolling off the conveyor belt of innovation to help advertisers make the most of their digital ad dollars.

Supply path optimization (SPO) falls into that bucket.

What is SPO, and why is it a game changer for programmatic advertisers?

This article answers both of those questions.

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What Is Supply Path Optimization (SPO)? 

Supply path optimization, or SPO, reduces the redundancies and intermediaries between advertisers and publishers.

Supply path optimization is “understanding who is touching your inventory and [removing] as many touches as you possibly can,” said Prebid President Mike Racic.

In the simplest terms, SPO ensures media buyers purchase ads at the best price while allowing publishers to maximize revenue, both of which are increasingly top-of-mind for media buyers and publishers as they fend off the down economy.

Jounce Media Founder and President Chris Kane said, “SPO is really just making deliberate choices about which auctions to participate in and which ones to ignore.”

Where Did SPO Come From?

Almost paradoxically, the impetus behind this new form of optimization is a decrease in ad tech investments. 

AdWeek reports that the ambiguity surrounding future ad tech legislation is causing many venture capitalists to place their funding elsewhere.

“Whatever funding is left in the ad-tech ecosystem is being snapped up by an increasing array of middlemen seeking to get their share of the multibillion-dollar digital ad market,” the article points out. “In an attempt to bring some sort of transparency, we’re now seeing advertisers become a bit more choosy about partners, using SPO to slim down the number of supply-side platforms they work with.”

In other words, the multiplex of supply side platforms (SSPs) and demand side platforms (DSPs) is getting crowded.

As a result, advertisers must determine which platforms are worth getting onto and which make sense to pull out of. At the same time, publishers work toward increasing ad revenue. 

“With thousands of ad-tech middlemen littering the landscape and seemingly more entering daily, marketers are quickly realizing the need to be smarter about the outfits they partner with,” writes Shoshana Wodinsky for AdWeek. “Enter supply-path optimization, or SPO, which translates to cutting through the clutter between media buyers and the publishers they work with.”

What role does header bidding play?

Header bidding is a programmatic technique that allows publishers to offer ad inventory to more than one ad exchange at once before making the call to ad servers. By allowing multiple bids at the same time, publishers make more money.

Yieldbot CEO, Jonathan Mendex, said, “Header bidding is a much cleaner and better tech integration between revenue partners, ad tech companies and publishers compared to what’s going on currently.”

While leveling the playing field was necessary, it created a new problem: DSPs receive multiple bids for the same ad impressions. As a result, they had to pick a “path” without losing the inventory.

Enter supply path optimization.

Now, media buyers can pinpoint the best—and most profitable—path for their ads.

What Are the Benefits of SPO?

For those pushing SPO, it’s meant to benefit publishers by giving them an avenue for better, more efficient advertising relationships and benefit advertisers by decreasing spending in unnecessary areas.

Considering at least 50% of every dollar spent in digital channels now goes to intermediaries rather than publishers, according to three studies, it seems there is a lot to optimize. 

An article from Forbes summarizes the challenge nicely: “In what other industry would customers be OK paying a 50% tax on goods and services, and on top of that be at risk of money simply gone missing?”

To push for transparency isn’t exactly scaring away SSPs, either.

Adam Soroca, the Head of Global Buyer Team at Rubicon Project (an ad network), writes that “the recent transparency movement stands to build buyer confidence through curating efficient, transparent programmatic partnerships while establishing clear industry benchmarks.”

The 3 benefits of SPO

  • Cost: SPO pulls back the curtain and gives buyers a glimpse into the fees of different SSPs. It also improves the efficiency and effectiveness of the auctions, which translates to higher-performing ads for a better price.
  • Insights: Eliminating the unnecessary complexity from auctions gives media buyers a better vantage point into performance, which they can use to improve future campaigns.
  • Control: SPO largely eliminates the fraud that comes with the “old way” of buying ads, ensuring a brand’s ad only shows up in tandem with websites they want to be associated with. The simplicity of SPO also increases accountability and rewards partners acting in advertisers’ best interests.

The primary factors that go into an SPO-based decision are inventory quality, the scale of advertising, pricing, audience, and the mechanics of the auction platform. It’s a perfect combination that will continue to catch the attention of advertisers.

SPO: A Move in the Best Interest of Programmatic Advertising

Programmatic advertising’s meteoric rise has been nothing short of remarkable.

Between 2017 and 2021, programmatic ad spending increased by more than 122%. Despite an expected slowdown in spending this year, largely due to the economy, by 2027, spending is expected to reach more than $700b.

The growth lends light to programmatic’s efficacy but also points to the need for ad tech players to constantly improve. SPO isn’t exactly new, but it’s the perfect example of the industry working together in the best interest of everyone involved.

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