The ad tech industry is growing on a massive scale, it is expected to grow 5.9% YoY (according to an IAB report). To keep up with such scale and the complex nature of the industry, folks should be prepared to also face the unique challenges that come with it.
Transparency in the programmatic supply chain is one such challenge prevailing in the industry. With so many parties involved in the supply chain, it has become even more difficult to keep track of ad spend and quality. That is why the industry needs Supply Path Optimization (SPO).
Supply Chain Optimization is a process of increasing transparency and efficiency in the programmatic supply chain by cutting down the number of intermediaries that are not adding significant value.
Why Is Transparency Needed?
Transparency in the supply chain involves a lot more than just making information available to all parties. It involves creating an environment of trust where all stakeholders feel confident that they are receiving fair and honest information.
This includes details about ad placements, ad inventory, and pricing. Ensuring transparency is important because it promotes better communication and helps build strong working relationships between publishers and advertisers.
Benefits of SPO
It is often perceived that SPO only benefits advertisers, but that is simply not true. Both the supply side and demand side can greatly benefit by optimizing supply path efficiencies:
- Increased Transparency: SPO provides better visibility and insights about the ecosystem — the intermediaries involved, exact ad spend on impressions, etc. It enables advertisers to tackle the issue of bid duplication and enables publishers as well as advertisers to identify and eliminate unnecessary or fraudulent players.
- Brand Safety for Advertisers: With SPO, advertisers feel more confident about their brand image and safety. They can eliminate the SSPs who do not follow their brand safety guidelines.
- Increased Revenue Opportunities: Streamlining SPO can ensure that publishers receive the highest bids possible for their ad inventory ultimately increasing ad revenue.
- Reduced ad fraud: SPO can help publishers reduce ad fraud by ensuring that their ads are only displayed on legitimate websites.
- Increased Efficiency: SPO can help publishers and advertisers improve the efficiency of their programmatic advertising inventory and ad campaigns by reducing latency and improving transparency.
How does SPO work?
To make sure that SPO works in the most optimum way, advertisers need to come up with certain strategies to apply. One of the ways advertisers could reclaim control and optimize the path is by limiting the number of SSPs and ad exchanges they work with and work with a select number of partners. They would also need to focus on cutting off resellers from the market and opt for bids that offer them the best chance of winning. It is always important to make sure that every bid must bring a unique value attached to it in an auction-themed environment.
One of the best ways to implement SPO is to make sure that multiple routes are being avoided to buy or sell inventory. The lesser the paths, the less the chances of duplication.
According to recent studies more than 60% of buyers currently think that SPO has reduced the chances of fraud while the buying power has also been enhanced for at least 30% of the buyers in the landscape, along with this roughly 20% of them have seen a more transparent Fee structure due to the same.
SPO Implementation steps include:
Developing a thorough grasp of your programmatic supply chain is the first step in deploying SPO. This includes the process of figuring out all the intermediaries who are buying and selling your ad inventory.
- Evaluating and consolidating intermediaries:
Once all the intermediaries have been identified, evaluate the ones which are unnecessary or ‘bad actors’, the ones adding costs and latency to the page load time.
Based on the evaluation, consolidate the significant ones and eliminate the ones not adding value to the supply chain.
- Monitoring the results:
SPO is an ongoing process and it needs to be measured regularly. This will help in analyzing the efforts if the goals are being achieved or not. Based on the analysis, those efforts can be streamlined and optimized.
This can be a complex process at times and can be achieved by having the right resources in place. Also, working with an SSP or DSP partner can be considered to simplify the process.
What Are the Best Practices for Buyers and Sellers to Facilitate Supply Path Optimization
There are several best practices for buyers and sellers to facilitate supply path optimization. These include the use of ads.txt, sellers.json, a lesser number of SSPs, and adherence to industry standards including brand safety and relevance.
Ads.txt and sellers.json are text files that are placed on a publisher’s website, which allows buyers to verify the identity of the seller and ensure that they are buying ad inventory from authorized sources. Reducing the number of SSPs can help optimize the supply path by reducing the complexity of the supply chain, which can lead to better efficiency and transparency.
Uses of AI for SPO
The use of AI for SPO is becoming increasingly common in the ad tech industry. AI algorithms can help automate the process of analyzing data, identifying inefficiencies, and optimizing the supply path. This can help buyers and sellers make better decisions, reduce costs, and improve efficiency.
With the growing changes in the current landscape, it is expected that AI tools will also be able to help in the execution of policies to optimize the supply path and can also aid inventory management issues.
Measurement and Enhancement of SPO Efforts
Measurement and enhancement of SPO efforts are essential for ensuring that the supply chain remains transparent and efficient. Regular monitoring and analysis of data can help identify areas for improvement and enable stakeholders to make data-driven decisions.
By enhancing SPO efforts, buyers and sellers can optimize their supply chain, reduce costs, and improve their ROI.
Recent Industry Developments
Recent industry developments, such as the implementation of the OpenRTB 2.6 draft, Ads.txt 1.1, and Transparency Center, have further advanced the cause of supply chain transparency and optimization.
The OpenRTB 2.6 draft includes new features that make it easier to detect and prevent fraud. Ads.txt 1.1 includes a new field that allows publishers to specify their direct relationships with advertisers, making it easier for buyers to identify authorized sellers. The Transparency Center provides a centralized location for buyers to view information about ad inventory and verify the identity of sellers.
Next Steps for Buyers and Sellers
Supply chain transparency and optimization are essential for the ad tech industry to thrive. Buyers and sellers must work together to create a transparent and efficient supply chain that benefits all stakeholders. By following best practices, utilizing AI, and embracing recent industry developments, the ad tech industry can continue to evolve and drive growth in the digital advertising space.