“Data-Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.
Today’s column is written by Kevin O’Sullivan, director of business development, EMEA at Amobee.
Supply-path optimization is too often considered shorthand for a wrecking ball mentality that turns off SSPs and publishers in order to consolidate media buying. Rather than swing a wrecking ball, advertisers should use a scalpel to cut a precise path to supply so that they can execute strategically. Here’s how.
Understand the key strengths of SPO
SPO is the enforcement of a supply strategy in digital advertising. In order to achieve that strategic goal, advertisers must think about four interconnected pillars.
Supply space mapping and data collection
Mapping programmatic supply is like mapping a city that’s permanently under construction. Parsing ads.txt and sellers.json files is the key. But real utility comes from understanding traffic flow and volume that comes from bid stream data collection. Additionally, knowing exactly what is being sold on a path matters a great deal. The path could reflect a custom ad unit controlled by a technical partner, a publisher's own ad placement, an auction rebroadcast (when an intermediary resells an auction) or something else.
Different paths will appear to have strengths for different reasons and without doing data collection and analysis, advertisers might draw conclusions that cause them to miss out on valuable opportunities. For example, publishers can have different video players on their site which monetize inventory through different paths. Deciding the publisher as a whole is good or bad for a campaign overlooks this variable and results in assumptions over facts.
Strategic analysis and rule design
Should you eliminate intermediaries? It depends. Some intermediaries are in fact the only paths to a certain supply. Automatically cutting those intermediaries could reduce supply, but without mapping and data collection, advertisers are flying blind. Rather than seeing this pillar as “cleaning up the supply chain,” advertisers need to do a thoughtful analysis of the supply space data to create bidding rules at the advertiser and campaign levels. Because agencies and advertisers often use similar DSP technologies, they must be able to customize their SPO approach and not be tied to a cookie-cutter method. As the proverb goes – one man’s trash is another man’s treasure.
Business negotiations with supply-side sources and platforms
Having mapped the supply space, analyzed the flows and developed an SPO rule set, buyers can improve their outcomes through informed negotiation. The benefits of channeling demand through a set number of partners – whether SSPs, publishers directly or a combination – includes securing preferred take rates and setting up data-sharing agreements that give buyers improved insight into a partner’s supply. But the outcomes of those negotiations will only be as good as the work advertisers do once data collection mapping and strategic rule design are in place.
Technical implementation of rule sets
A comprehensive strategy is worthless without the ability to execute. Advertisers, agencies and vendors must do the technical work of making SPO actionable at the campaign level. This work means going beyond a simple SSP cull and leveraging the custom algorithm functionalities that DSPs offer to highlight and optimize toward the correct paths for each publisher. But for advertisers, implementation also means holding partners accountable. Agencies will need to build tools and capabilities that allow them to plan and execute campaigns that leverage SPO. At the same time, buying platforms must have the capability to ingest and apply the rules advertisers set.
One size never fits all
As advertisers build capacity in each of the four pillars, they optimize supply paths. But it’s important to remember that efficiency isn’t a one-size-fits-all proposition. In fact, what’s efficient for one advertiser may be wasteful as far as another advertiser is concerned.
Some advertisers value CPA, but in so doing, their optimal supply path deviates significantly from advertisers that set different strategic goals and therefore use different media metrics and KPIs. For example, advertisers that rely heavily on video to drive overall awareness for their brand or product will likely tie efficiency in the supply path to metrics such as viewability and completion.
Meanwhile, for campaigns with extremely restricted targeting criteria, advertisers will use SPO to identify places where the win-rate can be improved in order to achieve scale. Finally, as large advertisers build SPO capabilities, they’ll discover that understanding the different kinds of efficiency will create a unique and valuable knowledge base that can be leveraged across brands, verticals and products.
SPO will be table stakes going forward
At the moment, ad tech is undergoing massive changes. The third-party cookie is going away. Walled gardens are on the rise. As ad tech reorganizes to address changes to identity, SPO will be seen as an essential jumping-off point. After all, a media buy inside a walled garden is, by definition, a form of SPO. Consequently, whether advertisers see it this way or not, they’re doing SPO as they navigate an ecosystem that is increasingly being defined by walled gardens.
But more broadly, SPO will be table stakes for all advertisers because they need a way to value the myriad supply choices across channels and optimize for their needs. The demand for that capability will only increase as newer channels such as CTV and mobile grow in popularity. Or, put another way, the sooner advertisers prioritize SPO, the faster they’ll be able to future-proof their media buying.