The Risks Of Second-Hand Inventory

The Sell Sider” is a column written for the sell side of the digital media community.

Today’s column is written by Ian Trider, director of RTB platform operations at Centro.

There is a widespread practice in this industry which puts advertisers at risk: resellers acquiring inventory from other resellers.

With such an overly complex supply chain, it is difficult or even impossible to verify the legitimacy of supply. When publishers tolerate this practice, they may unwittingly give their seal of approval to fraudulent supply via their ads.txt files.

Here’s how it happens. A publisher sells inventory to ad network No. 1. Ad network No. 2 then buys the inventory from ad network 1 before supplying it to an ad exchange. Ad network 1 asks the publisher to list ad network 2’s account on the exchange as an authorized path. The players may call themselves ad networks, SSPs or exchanges; the names do not matter, but the number of hands the supply passes through does. In severe cases, the supply passes through even more parties than this example.

Visibility into the history of an impression is generally not available to DSPs beyond the seller on the exchange. When a DSP buys this supply from the exchange, it knows that it came from the second ad network, but not much more. Even if DSPs demand further information, it’s difficult to verify going back more than a hop or two.

Some resellers are not choosy about how they acquire supply. Even when they get supply from the first ad network for the publisher’s site, they may also get supply from another source that also claims to have supply for the same publisher. That supply may be fake but by the time it makes it downstream to the exchange, its complicated and questionable origins are hidden.

There is risk to publishers if they endorse questionable reselling entities via their ads.txt files, which is something recently highlighted by DoubleVerify. Ads.txt is the industry’s equivalent of Rolex’s dealer directory for a publisher’s inventory – a listing of entities that a publisher endorses as its official sellers. Publishers listing an entity in their ads.txt file are saying that they authorize this entity to claim to offer inventory from their site. This works if publishers list only trustworthy entities, not indirect resellers.

If a publisher is asked by ad network 1 to list ad network 2’s exchange account, the publisher can’t verify that the inventory being sold by ad network 2 is genuine. How can they be sure that ad network 2 is not also receiving fake supply from some other source? If the ads.txt file endorses it, the publisher risks reputation damage when inventory is found to be fake.

Resellers are not inherently evil, but unnecessarily complicated resale chains are. Every major DSP is integrated with every major ad exchange or SSP. Every major website can access every major exchange. Smaller publishers, however, rely on second-tier resellers to gain access to this market. Any reasonably reputable reseller can access multiple major exchanges given their aggregate supply volume.

In other words, a complicated frenzy of reselling between entities is not necessary to gain access to most or all demand. And the more parties there are in an advertising transaction, the more of the advertiser’s dollar is consumed by the fees of intermediaries.

This situation is easily fixed if every party in the supply chain takes action. Publishers shouldn’t list entities in their ads.txt files unless they have complete confidence that the supply being sold by that entity comes from the publisher and only the publisher. This means not listing resellers of resellers.

Exchanges shouldn’t accept supply from anyone but the publisher itself unless the entity can demonstrate a direct relationship with the publisher. DSPs shouldn’t accept supply from exchanges unless they demonstrate the same criteria. Advertisers and agencies should demand that their DSPs enforce such a policy.

Technological improvements, like the upcoming ads.cert, help increase certainty that an impression is genuine. But technology alone doesn’t provide magic solutions to all problems.

Follow Centro (@Centro) and AdExchanger (@adexchanger) on Twitter.

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