Supply-Path Optimization: The Buy Side’s Answer To Header Bidding

“The Sell Sider” is a column written by the sell side of the digital media community.

Today’s column is written by Rachel Parkin, senior vice president of strategy and sales at CafeMedia.

Supply-path optimization (SPO), or, as I like to call it, supply pathing, might not sound like the sexiest topic, but is suddenly the new buzzword of the moment.

Much like header bidding emerged as a solution for the supply side and gradually evolved into a buyer discussion, buyers have already been addressing supply pathing, and it is just starting to bleed into the sell side.

Now is the time for publishers to take note and join the supply pathing conversation.

Why Supply Pathing Matters For Publishers

Supply pathing, simply stated, is a buyer’s way of assessing the most effective pathway to purchase a publisher’s inventory.

Header bidding put publishers’ inventory on the map, programmatically speaking, but it also created enormous stress on the buy side, with the same impression often appearing for sale in 10 or more exchanges. It’s like publishers offered the coordinates to their inventory pool without a map. Supply pathing empowers the buy side to chart its own version of Google Maps and determine the most efficient route to each publisher.

Publishers quick to dismiss supply pathing as only a buy-side lever would be mistaken. Demand-side platforms (DSPs) and agencies are already making decisions, smartly or crudely, about the best place to buy impressions without any supply-side input.

Some DSPs navigate the influx of bid duplication by placing a selection mechanism on each incoming bid request to reduce queries per second (QPS). Agencies are now getting into the game, too, seeking transparency of the full supply ad stack from exchanges to publishers’ waterfalls and asking questions about preferred supply-side platforms (SSPs).

SSPs are not necessarily addressing supply pathing for publishers, and some are filtering inventory to avoid being penalized for QPS.

Publishers that proactively lean in to supply pathing stand to benefit by ensuring that buyers know exactly where to connect with them, with each collectively arriving at the best outcome.

How Supply Pathing Could Be Harmful For Publishers

Any decision agencies and DSPs may be making on the optimal supply path without publisher input may lead to unintended side effects.

Inferences made by buyers could conflict with what a publisher sees as the best route because the buy side on its own can only operate on inferred information. The specifics of how a publisher organizes its waterfall, traffics each exchange in its ad server and even its SSP fee structures – all information that isn’t transparent to the buyer – could and should influence those choices.

Nuances in different SSP setups, such as multi-size vs. single-size auctions, could impact the derived win rate. Without bringing both the supply- and buy-side perspectives together, supply pathing could lead to inefficient outcomes that clog rather than clear programmatic pipes. At worst, it could shut off the pipes that maximize publishers’ avails.

Supply pathing could also end up inserting more technology layers between buyers and sellers, even though it should, in theory, bring them closer.

Technologies serving only the buy side may not achieve the best outcome in practice. Technologies tied to exchanges, such as Rubicon’s acquisition of nToggle, will ultimately work to push their exchange over others. Supply pathing technologies will inevitably take their own cut of the pie too. These technologies could clutter an issue that may be much more simply solved by buyers and sellers talking directly to each other about supply pathing.

Why Supply Pathing Is Beneficial For Publishers

What supply pathing has going for it is its potential to push our industry toward fee transparency and clean auction dynamics.

Supply pathing can bring agencies and publishers together for new conversations. So many ad tech challenges can be solved by buyers simply talking to sellers. Publishers need to ask buyers how they are approaching supply pathing and share their preferred paths to make more effective decisions together.

Supply pathing will also expedite the adoption of ads.txt. Every publisher benefits by broadcasting the “right” supply paths, so buyers know they all lead to the same place. Ads.txt could perhaps even evolve into a gateway that signals publisher-preferred paths.

Publishers need to be cognizant of their impact on QPS and dial back where needed. Randomly throttling QPS does a service to no one. Focusing buyers’ bids on the best pathways will create more bid density and move us closer to a unified auction.

Supply pathing may also force publishers to put a magnifying glass to their exchanges. Tertiary SSPs – aka potential back doors – should be thrown out. We need to stop saying yes to seemingly easy demand.

Like server-to-server and header bidding before it, all exchanges will want to be the chosen pipe. SSPs that reduce take rates could increase market share as buyers see higher win rates and more value is passed to the publisher. Supply pathing encourages competition, and publishers should press exchanges to test alternative fee structures.

Supply exchanges will be pressured to clean up their act and run transparent auctions. The threat of optimizing away from shady exchanges means that every exchange will benefit from operating under fair play. Publishers need to ask the same questions of our exchanges as buyers and cut off those that aren’t working effectively.

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This post was syndicated from Ad Exchanger.