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It might be boring, but a SPO or DPO strategy is something you can control right now

The biggest change you can make as a media seller or buyer, is not necessarily the most glamorous.

Supply path optimisation (SPO) and its cousin, demand path optimisation (DPO) had a bit of a moment in the calm before the cookiepocalypse storm, but have subsequently not been getting the time or energy they deserve. In a recent event that Beeswax and Rubicon Project jointly hosted, only around 20% of the attendees had an active SPO or DPO strategy.

Firstly, let’s start with a brief definition of what we’re talking about here:

Originally when adopting programmatic advertising, a publishers would work with one single supply side platform (SSP).

Over time, as programmatic adoption grew, publishers would work with multiple SSPs but in a waterfall formation, with a favoured SSP getting the first chance to surface their inventory, and anything unsold moving to a secondary SSP.  At most, the publisher would have three, perhaps four, SSP partners.

With the arrival of header bidding technology, which started to be adopted en masse in 2016, publishers were able to include multiple SSPs within the header section of their site. And so as a user visits a website the opportunity to serve an ad to that user could be offered by ten or even more, SSP partners.

For the demand side platforms (DSPs), this has meant additional overheads, and their operating costs now include many more bid requests processed on behalf of their customers. With this set up, they are potentially receiving each single impression in duplicate, multiple times. 

DSPs have reacted by increasing their SPO game, effectively determining which SSP they wish to use to access publishers’ inventory.

They may opt to only receive certain publisher’s bid requests from certain SSPs. This is particularly pronounced for DSPs that also own SSPs – as they have the most to gain if they buy from themselves.

SSPs and brands have responded to the rise of SPO with demand path optimisation, DPO, liaising with brands and agencies around which platforms they should be using to best access their inventory. 

So now that we know what we’re talking about, why will it make a difference to your business? 

Winning bidder wins

The programmatic advertising landscape is run on auctions, and in certain pockets of inventory, the difference in winning or losing the auction can be as little as $0.01. Anything, therefore that reduces your bid in any way, also potentially reduces your win rate – the success rate for your ability to access the supply that you want. Let’s start with SPO: a user has just arrived on a publisher’s website, this publisher is on your whitelist and you want to bid for that impression. You can see this bid request through five different SSPs – but each of those SSPs will have a different commercial agreement with the publisher. Given that most publishers want their SSP partners to compete on net revenue rather than gross revenue, the bids that they are comparing might take into account these SSP fees. Let’s imagine that across the five SSP partners in the example, those fees range from 8% to 15%, so for a $5 bid in revenue to the publisher, this could represent a 6.5% difference, the difference between bidding $5.40 and $5.75.

Key takeaway: SPO (or the lack of it!) can influence your win rate.

Access to supply via a chosen SSP only

Many DSPs have some level of skin-in-the-game on the SSP side.  Where this is the case, in order to reduce their costs and/or maximise their profits (remember that with header bidding each DSP is receiving the same bid request multiple times) they may throttle access to certain supply. This skin in the game might be their own SSP platform, or it might be in the form of a less visible alliance.

When the same company owns both a DSP and an exchange, it’s clearly very interesting for them to take their fee on both the demand and supply sides. This can lead to some DSPs limiting access to, or bidding more often on, the same bid request from SSPs other than their own. The implication of this being your bid response might become less competitive in the auction and your win rate may be impacted. 

Key takeaway: SPO done by someone else is not done in your interest.

Access to supply overall

DSPs commonly throttle supply to manage costs. Some SSPs have invested heavily in helping demand side partners with this.  For example, the Rubicon Project’s acquisition of NToggle allows them to help DSPs manage costs by sending more of the bid requests that this DSP is bidding on and winning on, and fewer bid requests of a type that are less interesting. 

While this is a brilliant product from the DSP perspective, it can mean that for buyers who want to access particular types of supply, deal-id, or particular audiences, see throttling applied to that supply at a platform level.

On top of this, certain publishers or media houses might not make all of their inventory available across all partners.  One German sales house we spoke with recently, mentioned that a buyer might only see 70% of their supply if they were only accessing it via one SSP. 

It’s often unclear what buyers can do to improve their access to specific pools of supply, without being hit by some kind of throttling.  Some DSPs, such as Beeswax allow customers to carry out their own SPO, effectively enabling them to  receive 100% of bid requests on a particular audience segment.

Key takeaway: SPO can influence your reach.

So, I said above that around 20% of people we speak to had a strategy. Those that did were generally trying to reduce the number of partners they work with, removing any who do not add value.  That said, they were keen to point out that the advertiser, agency and publisher may all have different SPO objectives. Those could be reach, win rate, cost efficiency or something else entirely. Increasingly agencies are taking matters into their own hands. For example, the The Goodway Group launched pioneering SPO work with PubMatic to ensure a constant SSP percentage take rate; this is becoming increasingly common in Europe. 

From the publisher's perspective, the main priority is to look for unique demand. Anything else is just shifting demand from one partner to another and not really driving incremental revenue. Incremental demand could take many shapes though, there are still specialist SSPs and DSPs for specific formats or devices – mobile, native, etc – which make it hard to reduce the number of partners.

To conclude, SPO is not cool or sexy.  It requires quite detailed study of log-level data and potentially many AB tests to establish who are the right partners for you both from a DSP or SSP perspective where different types of inventory and campaign requirements are considered.  However, given that all of programmatic is auction-based (excluding programmatic guaranteed, ) and this has such a huge bearing on your competitiveness in the auction, neglect it at your peril!

Cadi Jones, commercial director EMEA, Beeswax. She tweets on @cadielisejones.

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