Although the buy side has largely embraced supply path optimization (SPO), the same can’t be said for the sell side.
The average size of an Ads.txt file among the top-grossing 10,000 publishers has tripled between 2020 and 2022, according to recent data from Jounce Media.
Whereas brands and DSPs are whittling down the number of supply paths they use to purchase ad inventory, publishers are financially incentivized to work with as many partners as possible.
But there are changes afoot that could alter the economics for publishers.
DSPs, SSPs and even agencies are striking SPO deals and creating curated marketplaces – marketplaces that increasingly exclude publishers that operate inefficient supply paths.
Curated marketplaces
The growth of curated marketplaces means SSPs are no longer the only players with a direct connection to publisher inventory.
Last year, The Trade Desk raised eyebrows with the launch of OpenPath, its direct-to-publisher offering, and agencies – GroupM in particular – inked SPO deals with multiple SSPs, including PubMatic, Magnite and Index Exchange.
These SPO deals have “teeth,” said Curt Larson, chief product officer at SSP Sharethrough, who noted that some agencies are “even disabling the purchase of non-approved exchanges inside their DSPs.”
“That elevated the realization on the supply side that we better be on the agencies’ good lists,” Larson said.
Ballooning Ads.txt files
The best way to get into a buyer’s good graces is to operate an efficient supply chain. But publishers often authorize an excessive number of supply paths to their inventory, including more resellers, in an attempt to generate revenue.
“Publishers say they’re building deep strategic integrations with two or three exchanges,” said Jounce Media President Chris Kane. “It doesn’t change the reality that nearly every publisher has been, over the last three years, ballooning the number of bid requests they send to DSPs.”
The average RTB-enabled publisher monetizes through 28 SSPs and authorizes 16 SSPs to resell its inventory, according to Jounce.
The fact that publishers have bloated Ads.txt files isn’t all that surprising, said Emry Downinghall, SVP of programmatic revenue and strategy at Unwind Media.
Ad tech vendors, publishers and SSPs tend to believe that “increasing bid density through more connections leads to better business outcomes due to more pressure in the auction,” he said.
Between 2020 and 2022, CPMs were flat or on the decline, which helps explain why publishers increased bid density to boost ad revenue, Downinghall said.
But increasing bid volume has little to do with increasing the value of ad inventory, which takes a lot of work, including implementing price flooring, investing in engineering and removing ineffective endpoints from supply paths, Downinghall said.
Ad tech vendors persuade publishers to buy into “pipe dreams,” said Jonathan Penn, head of programmatic sales and agency development at Recurrent Ventures, which owns a portfolio of media brands.
“Vendors are trying to get publishers to put in a multitude of reseller line items,” Penn said. “That creates cheap reach and cannibalizes our inventory, and it’s bad for clients and for the environment.”
Sustainability as a motivating factor
One of Recurrent’s main motivations for removing resellers from its Ads.txt file and creating more direct connections with the demand side is to reduce its carbon footprint, Penn said.
“When you remove partners that are only providing cheap reach to your inventory pool,” he said, “you have fewer QPS [queries per second] impacting the environment.”
DSPs can implement QPS caps, block sellers whose inventory fails to meet viewability thresholds and manage – thereby limiting – which supply chains they listen to. For example, a DSP could instruct its exchange partners to avoid Google Open Bidding or pass over bid requests from exchanges that resell inventory, Kane said.
Buy-side platforms have also started assigning sustainability scores to publishers. These scores aren’t yet widely used as signals for cutting off energy-inefficient publishers from demand, but they likely will be down the line.
At the IAB Annual Leadership Meeting on Monday, the IAB Tech Lab launched a Green Supply Path Initiative with Scope3 and Ad Net Zero to get more visibility into carbon emissions across the digital ad ecosystem and give buyers a way to enforce their emissions standards programmatically.
But here’s a more cynical view: The push for sustainability also works as a cover story for buyers that want to change the narrative, Kane said. After all, taking proactive steps to reduce carbon emissions also reduces costs.
DSPs have spent the past decade highlighting the growth of their QPS capacity “as if it were a point of strength,” he said. But processing more QPS costs money, and it’s becoming a liability as more buyers come to prioritize environmental sustainability.
Now, Kane said, DSPs can reduce the “offensive waste of energy” resulting from the number of queries per second they process while saying they’re “committed to operating an environmentally responsible advertising business” – even if their real motivation is financial.
Despite increased pressure from the buy side, it’s still early days for environmentally sustainable publisher ad tech stacks. But this will be the year that the issue finally bubbles up to the C-suite, Kane said.
“Heads of rev ops, maybe even CROs at major media companies, are going to have to explain to the rest of the executive team why they have 20 directly integrated exchanges and allow 10 of them to initiate resold auctions,” Kane said. “That conversation is going to happen this year, if it hasn’t already, at every media company that’s selling through RTB pipes.”
