The programmatic advertising landscape has evolved significantly since its inception, introducing new complexities and challenges for both buyers and sellers.
At the heart of these changes lies supply-path optimization (SPO), designed to streamline ad buying by ensuring transactions occur through the most efficient and transparent pathways possible.
As the programmatic ecosystem matures, the role of SPO has become increasingly crucial.
Understanding SPO
The need for SPO emerged with the rise of header bidding, which allows publishers to receive bids from multiple supply-side platforms (SSPs) simultaneously, rather than sequentially, as in the traditional waterfall model.
Header bidding leveled the playing field by allowing all SSPs to bid concurrently on the same inventory, enhancing competition, but also introducing more complexity. SPO helps buyers navigate a multitude of ad bids and choose the shortest path to a successful ad placement.
Today, SPO promises to help buyers identify the most efficient connections to transact, reducing costs and improving transparency.
Optimized supply paths consume less computing power, reducing costs. In theory, shorter paths can deliver ads faster, reducing latency. With fewer intermediaries, the supply path can be more transparent for brands and publishers, because it’s easier to report on.
An optimized programmatic supply path might have three to four intermediaries: The brand works with an advertising agency (intermediary 1) to buy ads, using a demand-side platform (DSP) (intermediary 2), which represents the brand’s interests at an auction run by a programmatic advertising marketplace (intermediary 3). Meanwhile, a publisher works with a supply-side platform (intermediary 4) to offer their advertising inventory on the programmatic advertising marketplace.
Inefficient supply paths take a meandering journey to the deal. In some cases, these supply paths use 10 or more intermediaries, with multiple DSPs offering the same ad – often at different CPMs – to a number of marketplaces and buying ad space from multiple SSPs, which might offer the same advertising inventory at different CPMs, too.
The broader impact of SPO
While SPO might seem like a buyer-centric initiative, its impact on publishers and SSPs is profound. For publishers, the SPO challenge is to identify which SSPs genuinely contribute to incremental revenue growth while maintaining competitive CPMs. This shift toward efficiency over sheer volume is reshaping the SSP landscape, with SSPs striving to stand out by offering unique value propositions and fostering direct connections.
As an SSP that works closely with publishers, solving these challenges lands on us and our peers on this side of the business. If we’re successful, supply-side SPO shows up as fewer, higher-quality impressions appearing on the marketplace. Lower volume, higher CPMs.
If header bidding led to an explosion of new SSPs, SPO will likely lead to the SSP market getting trimmed down to a core group of SSPs committed to delivering high-quality ad supply to the marketplace.
The average brand’s campaign appears on 23,000 websites, with roughly 4% of ad spend going to made-for-advertising (MFA) sites – low-quality content farms that pack their pages with as many ads as possible. At Start.io, we take supply-side SPO seriously and have invested meaningful R&D to push the ball forward on our own commitment to delivering high-value ad impressions to the marketplace efficiently.
Our motivations are practical – supply-side SPO will help our customers win a higher percentage of bids while reducing unnecessary hosting costs for us. There’s more money to be made by offering a lower volume of targeted traffic than a higher volume of junk traffic.
As the programmatic advertising ecosystem continues to get trimmed by SPO, we’re confident the winners will be the ones who prioritize quality over quantity.
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