Blog - SPO is important, but do brands understand the benefits?
by Joel Franklin
Supply Path Optimisation, or SPO as it is more commonly referred to as, has become a buzzword of the ad tech industry over the last few years. Yet, it carries a great level of importance and many brands, agencies and DSPs are actively implementing SPO strategies. At its core, SPO is one of the most effective ways for brands looking to dissect the layers between media buyers and media owners.
What is Supply Path Optimisation and why is it important?
The waterfall model traditionally adopted by publishers dictated the supply side platforms (SSPs) that media buyers had to integrate with directly or indirectly as a means of purchasing their inventory. This was largely down to the fact that a large proportion of publisher inventory was exclusive to a specific SSP or their waterfall set up gave preference to a certain SSP. As a result, media buyers’ integrations to SSPs were vast with 30+ connections being considered a norm to ensure they had the effective means of accessing all publisher’s inventory.
Fast forward to the dawn of header bidding and the traditional waterfall model was tipped upside down and altered the ecosystem for buyers in several ways. The heavily adopted header bidding framework flattened the waterfall (from vertical to horizontal) making publisher inventory available via multiple SSPs simultaneously. Thus, the exclusive and preferred partnerships became less relevant resulting in an expansion of buyers’ paths to purchase. As the ecosystem shifted, buyers have been granted greater levels of choice and with this comes empowerment of more control in where they buy their inventory.
As programmatic claims a larger share of media spend it is important that brands take advantage of these greater levels of control and should be challenging their supply partners. The ultimate question brands need to be asking themselves is “What value does this supply partner add and does this value justify the cost?” This can only be answered through employing SPO strategies.
The benefits of employing SPO strategies for brands
1. Economic Control
Typically, the primary element of Supply Path Optimisation the industry focuses on are the economic benefits. Through consolidation, SPO can increase the efficiencies of brands ad dollars by tackling the four key challenges that exist when buying across multiple supply partners.
- Understanding Supply Chain Fees – The black box nature of SSPs combined with multiple supply paths to purchase adds a layer of complexity in understanding the supplier’s fees and when and where do they take them. The supply chain economics becomes even more fragmented when SSPs work with resellers that also charge a fee meaning questions around the value of your ad dollar, multiple fees and discrepancies in fees lead to unresolved questions. By consolidating the number of SSPs it becomes easier for brands to foster better supply relationships and understand the supply chain fees being applied.
- Leveraging Buying Power – A brands ad spend has historically been split across multiple SSPs making it difficult for a brand to leverage its true buying power as a means of influencing negotiations around trading agreements with SSPs. The consolidation means that the spread of ad spend is across fewer SSPs enabling brands to grow strategical partnerships where they can influence negotiations and create value for both themselves and their suppliers.
- Inefficient Auction Dynamics – Current auction dynamics see buyers purchasing across multiple SSPs for the same inventory. This fragmentation and the fact that buyers are often SSP agnostic can mean that at times buyers are bidding against themselves resulting in being overcharged for inventory. When participating in multiple auctions for the same inventory it becomes a challenge for buyers to truly understand what is happening resulting in unfair auctions dynamics go unnoticed. New developments in SSP technologies such as Bid Shading and machine learning algorithms help buyers achieve more favourable dynamics in auctions which often lead to greater savings and higher return on ad spend (ROAS)
- Supply Chain Efficiency – Infrastructure costs SSPs incur tend to operate on a fixed cost model meaning they remain constant regardless of how much buyers spend. These costs dictate the SSP fees a buyer must pay and therefore any inefficiencies result in higher fees being passed on to buyers. Consolidation of spend to specific supply partners can help in maximizing the efficiencies of these infrastructure costs for an SSP which can often be passed on to a buyer, generating improved economic value for buyers.
2. Quality Control
The world wide web is an expansive landscape with countless websites available and new sites being created daily. With the advancements in programmatic audience targeting brands can reach these audiences at the right time, with the right messaging on the content they are engaging with. Despite the mass quality sites available there is a large percentage of bad apples that plague our ecosystem with ad fraud and poor-quality content. Through the application of SPO brands can employ brand safety and quality control measures such as utilising Ads.txt or allow and/or block lists as a means of mitigating these bad apples.
3. Concentrated Innovations
The ad tech ecosystem is known for its fast-paced environment where in some cases what changes one day is outdated the next. Yet, when brands and SSPs integrate with over a 100 vendors collaborative innovation is slowed down and often stagnant. Due to the consolidation element of SPO, brands can forge meaningful partnerships with their desired SSP partners and can collaboratively work with them to build custom solutions whilst helping to define SSPs product roadmaps.
4. Holistic Insights
Breaking down and understanding a single SSPs programmatic auction is a complex and difficult task. Every additional SSP auction that is analysed adds another layer of complexity to the mix which results in gaining any real insights virtually impossible. Brands can gain better visibility and greater insights on how to improve their business efforts through an optimised supply chain with fewer participants creating meaningful value to brands.
5. Control Behaviour
Holding supply partners accountable is difficult to police when there are many supply partners in the mix, and this can enable under the table activity to breed. An optimised supply chain has simplicity at its core and enables brands to hold supply partners accountable for their actions but also allows them to reward supply partners that are continually acting in accordance with your brands interest and positively impact ROI.
Supply Path Optimisation covers a wide spectrum of areas. This can often be intimidating, making it difficult to know where to begin. If you find yourselves in this position, then The Programmatic Advisory are here to help! We can help you to navigate through the landscape and define the SPO strategy that works best for your brand.