The end of Yahoo’s SSP represents an unexpected shift in the digital advertising landscape.
The move, which Yahoo announced last week, demonstrates how difficult it’s become for supply-side platforms to prove their value in a commoditized marketplace.
Many publishers have come to view their SSP partners as disposable line items.
The fact that Yahoo is openly treating its buy-side business as the favorite child while disowning its sell-side business should prompt self-examination among SSPs as to what their real value is in the marketplace.
Still, no one was expecting Yahoo to shut down its SSP and lay off 1,600 people from its ad tech division.
“We might have wondered how long Yahoo was going to continue to run both sides of its business, but [the news] was not expected,” said PubMatic CCO Jeff Hirsch.
Interchangeable exchanges
Yahoo’s departure from the SSP market caught the industry by surprise.
The companies that did business with Yahoo’s SSP received little advance notice, if any.
“It was a shocker, but more shocking was the way we found out,” said Jason Boshoff, COO at DSP Bidtellect. “After the announcement, we got an email from the team we were working with that said, ‘None of us are here anymore, but here’s a manager if you need to contact anyone.’”
Yahoo is fleeing a market in which SSPs are increasingly considered demand aggregators that compete with DSPs rather than as close publisher partners, Boshoff said.
Meanwhile, the buy side is setting the tone. Advertisers are pushing for more direct connections to publisher supply, less reselling of inventory, fewer redundant auctions and more transparency from programmatic partners.
These shifts leave less of a role for SSPs to play, leading publishers to treat them as interchangeable commodities and question whether the value that SSPs provide justifies their take rates, said Alessandro De Zanche, an ad industry consultant.
Demand-side differentiation
Cutting its SSP should help bring the as-yet unprofitable Yahoo for Business ad platform into the black, Yahoo CEO Jim Lanzone said in a press release. The new DSP-focused offering will be known as Yahoo Advertising.
Yahoo’s DSP gives advertisers direct access to its owned and operated (O&O) media properties, Boshoff said. Rather than having to buy Yahoo inventory from, say, 10 different SSPs, advertisers can buy directly from Yahoo.
Like The Trade Desk’s OpenPath offering, this is another instance of the supply-path-optimization-driven shift toward DSPs creating direct connections to publishers.
Through its Connect ID, Yahoo’s DSP also offers ID matching against deterministic first-party audience graphs derived from its O&O sites, Yahoo Mail and fantasy sports, along with unique demand, said Jonathan Penn, head of programmatic sales and agency development at Recurrent Ventures.
Even though Yahoo’s SSP showed some promise, it suffered from a lack of automated features that are standard in other SSPs, and it struggled in the shadow of the company’s fast-growing DSP business, Penn said.
There were also signs that Yahoo’s SSP was being neglected from an innovation standpoint. According to Penn, publishers in Recurrent’s portfolio complained that Yahoo’s self-serve platform was less user-friendly than others.
Leading SSPs have automated tools that allow publishers to customize a deal ID based on a buyer’s needs in minutes.
“With the Yahoo SSP, there was more of a manual process for creating programmatic pipes for marketers,” Penn said, “and the latency of getting those deals live was a challenge for supporting clients’ demands.”
By contrast, Yahoo created a “greatest hits” DSP that incorporated features from other leading DSPs based on client feedback. “It is a shame that the product focus on the SSP side did not get the same attention as the DSP side,” Penn said.
Plus, although Yahoo’s O&O inventory is a strength for its buy-side business, it may have been a detriment to its SSP’s efforts to court third-party publishers.
An SSP has to be committed to working with its publishers, PubMatic’s Hirsch said. “But if you own your own content, you’re likely going to favor that content, and it’s harder to be objective,” he said.
Sunk costs
Yahoo had long tried to build a walled garden that could compete with the Google/Meta duopoly. Its decision to gut its sell-side business might be a wake-up call for other companies with ambitions to build an end-to-end digital ad platform like Google’s or Meta’s.
Yahoo’s SSP was the culmination of billions of dollars of acquisitions and investment by Yahoo and AOL, which were combined into one entity (initially known as Oath before rebranding as Verizon Media) by then-parent company Verizon between 2016 and 2017.
When Verizon sold its Verizon Media division to private equity firm Apollo Global Management in 2021, the ad tech business was rebranded yet again with the Yahoo name. But this grab bag of assets was never fated to become a profitable end-to-end ad tech platform.
The vision fizzled.
Still, after billions in sunk costs, it’s surprising to see the saga of Yahoo’s SSP end with a whimper. The company isn’t even looking to spin it into a separate business or sell it for parts, which would have been possible if it had a unique value proposition, De Zanche said.
“It’s a cautionary tale about how some entities aim to become everything and anything, Sellotaping companies together in a delusional quest for infinite reach at the highest quality,” De Zanche said.
Marketplace shifts
The question now is whether Yahoo’s failure to bring its end-to-end platform to fruition is a fallen domino that will cause other full-stack providers to rethink the value of their constituent parts.
An SSP can be a value-add for a buy-side business, for instance, rather than something a company should necessarily expect will be profitable on its own, said Doron Gerstel, CEO of Perion Network.
But whether SSPs are part of an end-to-end stack or not, Yahoo’s move will no doubt prompt reflection on how to stand out in a buyer-driven marketplace.
For example, critical yet simple offerings like the ability to include an auction ID or placement ID in a bid wrapper “were very hard to get out of SSPs until about six months ago,” Bidtellect’s Boshoff said. “Now, every SSP wants to accommodate the needs of the demand side.”
Only the most transparent and supportive SSPs will survive in the long term, he said.
“SSPs need to rethink who their core constituent is,” Boshoff said. “And if they don’t provide meaningful value, they’re going to be squeezed out.”
