Programmatic ad spending has been in an upwards swing ever since its inception but never before has it reached the heights it’s about to ascend. For 2022, forecasts show that programmatic digital display ad spending will amount to $155.23 billion, an increase of 18.9% compared to 2021.

While programmatic ad spending has been steadily increasing for years now, so has the value of each ad space transaction. In other words, advertisers are getting more bang for their buck through meticulous optimization of transaction processes. But why was this additional optimization necessary in the first place?

Programmatic scaled ad inventory by buying large quantities to the point that it became highly impractical. Despite having a revolutionary impact on the digital ad space, it made the entire transaction process too complex to understand and carry out efficiently. Transactions became less transparent, and little was known regarding the actual process or the fees each transaction carried. This made it more difficult to ensure that each dollar of ad spend was as impactful as possible.

That’s where supply path optimization comes into play. It provides a much better overview of the programmatic ad landscape, allowing for every trade to be more transparent and efficient. Here’s what both buyers and publishers need to know about supply path optimization, including how to leverage it in order to get the best price on all transactions.

What is SPO?

Supply path optimization is, as the name suggests, the process of finding the most optimal path towards desired ad inventory or buyer. In programmatic, the number of paths you could possibly take in order to reach your goal is incomprehensible by human standards, so an algorithm is needed to weed out expensive and insufficiently transparent options.

Another important aspect of supply path optimization is the replacement of inefficient ad trading models. A great example of this type of substitution is the switch from waterfall auctions to header bidding.

The waterfall method was known to undercut publishers by selling inventory as soon as the price floor was met. This meant any subsequent offers were ignored, even if they were higher than the first price that met the floor. Switching to header bidding makes it possible to capture the highest bids more efficiently and in less time. Unlike the waterfall method, header bidding allows for simultaneous bids, ensuring that ad inventory will be filled in time.

With more transparency comes more transaction security and the prevention of auction duplication, i.e., ad exchanges bidding on the same impressions more than once. Using sellers.json, ad exchanges reveal whether they’re buying impressions from resellers or directly from publishers. In this case, supply path optimization benefits the buyers, as it blocks anyone from bidding against themselves. This often happens when unauthorized resellers try to artificially boost bids.

These are just a couple of examples among many that show how supply path optimization benefits all parties involved in the ad trade process. However, as with anything, it’s a process that’s far from perfect, and there’s plenty of room for optimization and improvement.

The buy-side perspective

Too many separate supply paths can harm the campaign performance and the ROI, something that buyers are well aware of. SPO helps buyers, agencies and advertisers maintain full control over ad spending and supply paths.

For starters, buyers who rely on SPO mechanics have a far better insight into the exact supply path fees. Buyers can then consolidate their resources and focus on fewer SSPs while still reaching campaign goals and the target audience. With fewer SSPs involved, buyers pay less for the expensive technology involved in the process.

Overall, SPO helps buyers avoid being overcharged each step of the way and gives them control over which SSPs to interact with. They’ll save money while achieving the same (and even better) results.

SPO tactics for publishers

The switch from the waterfall auction model to header bidding — another form of SPO — is quite beneficial for publishers. Through better bidding infrastructure and multiple SSPs, publishers are able to optimize the selling process and get the best price in real-time.

However, there’s one more advantage of SPO for publishers that tends to get overlooked. Auction duplication, while beneficial in the short term, can have long-lasting consequences for publishers who engage in such underhanded tactics. DSPs already have the capacity to analyze ad networks for auction duplication. Every serious buyer will choose not to cooperate with publishers who openly try to manipulate inventory prices.

Abiding by SPO standards will give publishers plenty of opportunities to partner up with advertisers and form long-lasting relationships.

Data from Jounce Media
Data from Jounce Media

Tackle SPO with MGID

One such opportunity to step up SPO is by working with MGID. Publishers who are willing to integrate SPO in their business model will find that MGID is ripe with advertisers looking to directly connect with publishers on our platform.

Of all the traffic sold via MGID SSP, 95% of it is direct. For advertisers, that means successfully avoiding resold inventory and reducing unnecessary intermediary fees. We provide buyers with transparent data regarding our publishers, paving the way for successful long-term partnerships.

Since MGID is a company that adheres to contemporary advertising standards, we protect SPO mechanisms with the newest versions of ads.txt and sellers.json. Publishers list us in the ads.txt file, authorizing us to sell their inventory, and we add them to the sellers.json file to authorize all sales on behalf of our direct publishers.

Finally, we connect with DSPs directly, ensuring that the buy-side also follows the same set of rules. The result is total buyer satisfaction and a lack of duplication.

Conclusion

Supply path optimization is a standard that all parties involved should abide by. For publishers, it means long-term financial stability and sustainability, while buyers benefit from maximum transparency and profitability. With an intermediary such as MGID on your side, both buyers and sellers can rest assured that everyone plays by the same rules and enjoy long-lasting partnerships.