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Supply Path Optimization Paves the Way for Smarter Programmatic Ad Spend

Supply Path Optimization Paves the Way for Smarter Programmatic Ad Spend

More than twenty years after the launch of the first advertising network, you would think the ad tech environment would be well established. But there’s one increasingly popular tech approach that could help advertisers put their digital ad dollars to better use.  

It’s known as Supply Path Optimization — or SPO — and it’s meant to help digital advertisers the same way supply chain optimization helps logisticians. By choosing networks based on the main markets they serve, digital advertisers can get more strategic and plan further out for both reach and spend. 

What is SPO? 

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 increasingly crowded. Advertisers have to figure out which platforms are worth getting onto and which make sense to pull out of, while publishers work toward increasing their 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.”

For those pushing the approach, it’s meant to benefit publishers by giving them an avenue for better, more efficient advertising relationships and benefit advertisers by decreasing spend in unnecessary areas. Considering 60 cents of every programmatic dollar goes to middleman rather than publishers, it seems there is a lot to optimize. 

Finding Value in SPO

In a phrase, SPO means “searching for ad tech that adds value” for both publishers and advertisers.” It’s a transparency movement wrapped in fancy acronyms. 

It’s not necessarily 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 primary factors that go into an SPO-based decision are inventory quality, scale of advertising, pricing, audience and the mechanics of the auction platform. 

SPO can give ad buyers a better understanding of how ad placements or clicks are priced, where their digital ad dollars are going, and why a particular network’s inventory will work (or won’t work) for them. 

SPO isn’t exactly new. DigiDay ran a piece over two years ago (appropriately titled WTF is supply-path optimization). But it is growing in popularity, and with time may prove to be more than just another piece of ad tech jargon.