Thought Leadership

Less is Finally Becoming More in the Programmatic World

April 1, 2019
By Rob Beeler

This article was originally published by on March 28, 2019.

Transacting on digital advertising through programmatic channels continues to grow more complex. Many companies are exploring machine learning and more sophisticated algorithms to try to power through all the data required to understand which impressions to buy and at what price.

There’s another strategy, however, that more buyers are adopting that may have significant impact on the ad tech industry as a whole. I sat down with Adam Soroca, Head of the Global Buyer Team at Rubicon Project, to understand what Supply Path Optimization is and why it’s so important.

On Supply Path Optimization

Rob Beeler: What is Supply Path Optimization (SPO)?

Adam Soroca: Supply Path Optimization is the concept of a buyer, whether it be a brand, agency, or buying platform, consolidating their spend down to a handful of exchanges. The supply paths in many cases are duplicative, providing access to basically the same advertising inventory across publishers.

Rob: What caused this duplication?

Adam: The game of amassing supply really changed with the onset of header bidding. It used to be that the different exchanges represented different inventory. But with the onset of header bidding, multiple exchanges now have access to the same inventory.

Rob: Buyers started to figure it out.

Adam: The agencies were actually the first to move. It used to be that their traders would launch a campaign and the default setting was “select all exchanges.” Many of the agencies put an end to that a year and a half ago and chose only their top providers. The days of “select all” are over and that was the first wave.

Rob: What’s the second wave?

Adam: The supply paths buyers use are now under even more intense focus. It’s not just the brands or the agencies.  Supply Path Optimization is occurring at the platform level.

Historically, DSPs traditionally tried to receive as much traffic as possible from as many partners as possible.  But now, we’re starting to see the DSPs uncouple many exchanges from their system. They find they can achieve better KPIs by focusing on fewer supply sources. They’ve realized that many supply sources add limited value since they are resellers -that inventory is just changing hands unnecessarily.

Creating More Efficiency

Rob: How are buyers evaluating their SPO options?

Adam: There are three main categories buyers are using: scale, technology, and people.

They have to choose partners that have enough scaled reach into the supply to deliver significantly sized budgets across multiple channels – from display to mobile to video to audio to digital out-of-home.  As buyers think about doing more with fewer partners, a complete offering is quite appealing.

In terms of technology, the exchange has to demonstrate that they are able to build forward-looking products. Buyers historically haven’t had a direct relationship with exchanges. SPO is changing that. That’s allowing us to align road maps between the buyer vision and DSPs and exchanges for the execution. Demonstrating that the technology is not just rock solid, but that an exchange can innovate and build new products is another key decision criteria.

Lastly, it comes down to people. Buyers want to do business with people they trust. So many things have gone on in this industry that have shattered the trust of the relationships between all parties in the industry. We are hearing now more than ever that buyers want to work with people they trust; people who have the same cultural and business values.

The intersection of people and technology is pretty apparent as well.  We’ve earned the trust of the buy side community by building a team that partnered closely with buyers to understand their needs. And, delivering innovative products and services to those buyers.

Our Estimated Market Rate (EMR), which is our solution to buyers moving into a first price world, so they don’t get overcharged is a good example of a product that we built based on buyers’ voices.

The acquisition of nToggle, [my former company] is another example of our commitment to deliver unique value to DSP platforms, nToggle provided traffic-shaping so that DSPs don’t have to ingest a hundred percent of the bid stream. Machine learning now matches our supply with the demand and narrows the amount of traffic that the DSP platforms have to field, lowering their infrastructure costs.

The reality is that the results matter. The buyers have to achieve whatever KPIs they’re looking for, whether it’s selling a car or getting someone into a store or any other product that is being sold. Shoes, dresses, you name it. They have to have the ROI work out and so all of these things need to line up.  Fundamentally, the scale, technology and people all have to be in place to make this happen.

Examining Potential Drawbacks

Rob: Any downside to an SPO strategy?

Adam: No. The evidence has mounted and is pretty clear that nothing bad happens when the number of supply paths are consolidated. It’s easier to go from seventy-five or a hundred down to fifty. It’s harder to go from fifty down to ten or twenty, but we’ve seen some buyers get down to as few as three.

Campaigns deliver in full, KPIs are achieved and those buyers are able to really double down and do more with those remaining partners.

The additional benefit is SPO frees up resources from managing too many supply partners and policing the industry. It returns those resources to working on innovation and thinking about the future and what products and services will ultimately drive better publisher yield while also delivering better buyer outcomes.

Tips to Develop Strategy

Rob: What is your recommendation for buyers when they start thinking about an SPO strategy?

Adam: The two things that are the most important are to have a rubric and to look at the data.They should start looking at the data and developing a set of criteria to narrow the number of partners they work with. They should be comfortable with narrowing the field because it will make their lives simpler. It will ultimately make their campaign performance better.

Through some of the results we’ve seen from tests that some DPSs and some exchanges have done is that a lion’s share of the upside can be had by consolidating down to a few of the top performing exchanges as a whole, and then identifying any paths that might be outliers and working to identify why those paths aren’t delivering the KPIs that are needed and then refine those to get them to work.

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