“The Sell Sider” is a column written by the sell side of the digital media community.
Today’s column is written by Jeff Hirsch, chief commercial officer at PubMatic.
Looking back on global supply-path optimization (SPO) conversations as recently as the first quarter, several common themes were of interest across the board.
On the agency side these conversations were focused on innovation, workflow efficiency, partnering with companies closest to inventory and additional transparency. Advertisers often had the same focus areas with perhaps more attention on things such as log-level data and understanding the resources needed to bring programmatic operations further in house. Often, demand-side platforms (DSPs) wanted to streamline operations and gain the transparency needed to find and solve for redundancy and duplication.
The COVID-19 pandemic created clear and urgent focus areas in the industry push for SPO. First, the role of programmatic has grown, especially in emerging channels such as mobile and OTT, which are taking share from desktop, linear TV and other legacy businesses. Second, financial stability has moved to the forefront of many partnership conversations, with the goal of eliminating risk in a diverse and unstable supply chain. And third, buy-side companies have more limited resources and realize they can’t afford to manage 20, 50 or even 100 supply-side platform (SSP) relationships in the way they may have done in the past.
These effects can be seen across the three layers of the buy side: DSPs, agencies and advertisers.
DSPs driven by cost savings
Every SSP must assume that the recent request by The Trade Desk to streamline bid requests to a single supply path is the first of many.
The company’s timing may be uncomfortable for the sell side, but it’s a leading indicator of where the industry is headed. These conversations are no longer just about cleaner buy strategies or reporting for their own clients – they now also include a focus on internal cost savings. That may evolve as the economy recovers, but for now, working toward profitability is prioritized over rapid revenue growth.
Conversations are now driven by elements such as QPS and infrastructure costs that arise when a DSP must handle a huge flood of bids during an economic downturn. The DSP community is highly motivated to push responsibility for efficiency to SSPs to address the issue at the source. While initially nerve-wracking for SSP executives, the move is ultimately much better for programmatic as a whole, and everyone should prepare for a dramatically accelerated move to a single supply path as the norm.
Agencies and advertisers get smart fast
Agencies are currently caught in the middle between the large DSPs on the front lines and their advertiser clients. Already, agencies have talked about slimming their direct programmatic relationships by a factor of 10 or more to increase efficiency. Now, that strategy is going to accelerate. What may have unfolded over the next two years is likely to happen by the end of this year.
This summer, agencies also have an opportunity to exert additional influence over their own advertiser clients’ SPO strategy. Agencies and advertisers fall across the spectrum when it comes to programmatic buying maturity, scale and approach. With programmatic taking share from other channels, many agencies will have to ramp up their understanding of new channels quickly to add value to advertiser due diligence.
Programmatic is starting to influence new channels such as OTT as advertisers have held back budgets from canceled upfronts. With more flexibility this year, forging closer relationships with the programmatic sell side is tantamount to better understanding where to place bets.
The people on the ground
By Q4, there will be more casualties of the economic downturn, and the larger players in the space will likely attract the most interest because of their stability as much as their footprint and channel capabilities. This will help with several key initiatives in the market in addition to SPO. For example, rolling out an identity strategy becomes more manageable for buyers when they have fewer partners to integrate with.
But one thing will be much harder than before: Without the benefit of personal interaction, the big SPO deals made at the executive level will be harder to activate at the execution level. Where we once could hold lunch-and-learns, we will now rely on Zoom. Slack is always there when traders have questions, but having a team sitting together is the fastest way to increase the learning curve on new platforms.
My assumption is that SPO moves forward, full steam ahead, and that programmatic comes out in force across new channels such as OTT. My hope is that we don’t forget about the tactical, practical element of this activity, which involves new trading strategies, relationships and reporting and data workflows.