Survival Of The Fittest: The Ad Tech Edition

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 John Martin, global business development manager at Playwire Media.

Technological advances and a narrower focus on brand safety and inventory transparency (finally) have moved the digital media needle in the right direction over the last year.

But despite the forward thinking, the digitized supply chain still has too many players injecting too little value. I don’t forecast the prettiest outcome for them as ad tech continues to evolve.

The digital advertising pendulum swings from marketer to publisher, and if a product or service in between those two points is not serving a unique purpose, it will quickly be phased out.

On the flip side, ad tech models designed to serve both the advertiser and the publisher could begin to struggle if not executed cleanly. What they’re trying to achieve for either side of the supply chain can often be a fundamental contradiction.

Just think about their high-level objectives: A marketer wants to hit their audience for the cheapest price possible, while a publisher wants to maximize yield and increase CPMs. Trying to deliver on both as a “facilitator” seems somewhat unachievable, and it dilutes the impact of the overall service.

SSPs: An Endangered Species

A neutral pipe or an SaaS platform can provide that value and become the optimization layer, but I’d argue that many of our pipes are not neutral but rusted; some need cleaning up, and others need to be thrown out.

Just this week, we saw Tremor’s decision to narrow its focus to just the sell side in a deal to sell its demand-side platform (DSP) to Taptica. Many of the largest players in the market have recognized that pinpointing a unique selling proposition and specializing will provide them with longevity as ad tech goes through a pretty intense makeover.

Both the buy- and sell-side pipes must adjust. The rise of header bidding has exposed the weaknesses of some supply-side platforms (SSPs). Most publishers have adopted only four to five demand partners into their client-side setup, probably due to page latency, creating heavy competition and birthing this survival-of-the-fittest mentality. Now that native platforms are dipping their toes into the header bidding waters, it will become even more competitive. I expect most publishers to stick with their four-to-five partners but replace their partner for standard display with one for rich media or video.

Of course, the speculation is centered around server-to-server; the ability to integrate 15 to 20 partners sounds fantastic but I don’t think it will be adopted as swiftly as expected. Server-to-server is being tried and tested by publishers that have the capital and resources, but most publishers don’t have that luxury.

The Fate Of DSPs

Courtesy of the header bidding phenomenon, DSPs are also surviving and instinctively reacting to new buying economics. The increase in bid requests is costly, and platforms are left squeezed on margins. Some have failed and others have been acquired but the buy side is beginning to become less fragmented.

Nevertheless, margins are still under pressure, even if the fittest have a greater share of the market. The problem of increased costs from an increase in bids has been lightly cemented over via DSP acquisitions – not the most sustainable solution.

While it’s refreshing that publishers are finally benefitting from receiving the true value of their inventory, header bidding has opened the door to a new opportunity as a pipe: supply path optimization. This technology can help the landscape operate more fluidly and won’t hurt the DSPs’ bottom lines. It works by assessing the digital supply chain in real time and cherry-picking the optimal route to the end user.

Unconventional Market Entrants

Digital media players can learn an incredible amount from traditional enterprise software purists in regard to supply chain optimization. I wouldn’t be at all surprised if the likes of Oracle or SAP created a media-centric supply chain solution to complement their innovative supply chain management portfolios.

We’re already seeing these companies pivot into digital media as the landscape becomes increasingly driven by data and technology. Combining their prowess in predictive intelligence and machine learning, I expect to see these software giants, plus a few new niche vendors, leverage cloud-based supply chain optimization solutions. This would be a welcome addition in the battle to reduce bid density for traditional DSPs, and we might even see an enterprise software firm splash the cash on a buying technology – we’ve already seen Oracle acquire MOAT.

Technology provides cost and service efficiencies across pretty much every industry imaginable. Digital media is no different. The smartest are surviving by innovating and leading from the front.

In 12 months, there will be fewer DSPs, and I’m anticipating an SSP roll-up, where two to three SSPs merge into one. I believe supply path optimization will be a trend that is taken seriously and will shape a much more efficient transaction.

For the time being, it’s important for companies to be an integral layer of the value chain. Otherwise, they are probably just in the way.

Follow Playwire (@playwire) and AdExchanger (@adexchanger) on Twitter.

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  1. Many good observations here. On the fate of SSPs and header bidding, I suspect the days of publishers having to limit to 4-5 partners to avoid page latency are numbered. The barrier to server-side heading bidding adoption is being knocked-down by SaaS providers like ServerBid (for example…we’re not the only one). Cloud solutions make it easy for publishers to bring their partners server-side, and for partners to offer a header bidding adapter without building and supporting their own tech. As server-side header bidding moves to the cloud, true technical barriers to adoption should drop very quickly.