How to navigate supply path optimization in 2024

A phase of disruption and consolidation in the digital advertising ecosystem is adding complexity for brands trying to optimize their supply pa. Here, Jean Fitzpatrick (SVP performance partnerships, Magna) outlines four considerations brands should think about in this new era of supply path optimization.

The digital advertising industry is undergoing a significant consolidation. For years the adtech ecosystem has operated according to an unwritten agreement that demand-side platforms (DSPs) and supply-side platforms (SSPs) would stick to their own side of the fence.

On the one side, SSPs have worked with publishers, helping them manage and monetize their ad inventory – often by engaging with DSPs. Meanwhile DSPs served advertisers by enabling them to purchase and optimize ad placements across multiple publishers – largely by hooking up with SSPs. And, in recent years, advertisers have taken steps to optimize their supply paths and increase transparency within this established structure.

But this unofficial commercial agreement is coming to an end. DSPs and SSPs have started reaching across the aisle – with DSPs going directly to publishers and SSPs to advertisers.

Why? Many adtech providers are now publicly listed companies that need to demonstrate growth, and as programmatic is close to a saturation point (at least in display), offering new services is the most effective way to do this.

Most notably, of course, is The Trade Desk’s launch of Open Path connecting advertisers directly to advertising inventory across the likes of Reuters, Hearst Magazines and Conde Nast. But in recent months and years there have been other examples including PubMatic’s acquisition of the platform Martin, Freewheel’s acquisition of Beeswax, and Magnite’s acquisition of SpringServe.

SPO 2.0 in a time of consolidation

Before now SPO was focused primarily on reducing steps or providers on the supply side – reducing the number of SSPs and related intermediaries. Now advertisers have many more options – use a DSP to engage with publishers, use an SSP directly to manage the demand side.

This is the essence of SPO 2.0, and it’s gotten a whole lot more complicated. There's no right or wrong answer to how you manage it – it depends entirely on what works for the brand – but there are four things to consider...

1. Look for performance efficiencies

With SSPs and DSPs looking to cut each other out of the equation with new service offerings, a level of disintermediation (minimizing unnecessary intermediaries in the supply path) comes as standard – for example, finding a DSP with direct access to your preferred publishers without need for recourse to SSPs. But this consolidation phase offers other opportunities to improve process efficiency.

Reviewing and reducing the number of partners (DSP or SSP) can help form closer, more productive relationships with those you retain. With a greater understanding of your needs, your supplier may be able to provide enhanced insights, lower eCPM or higher win rates.

Certainly a smaller set of providers will allow you to negotiate terms and services with greater buying power. This should help you attain enhanced service levels, ensuring transparent fee structures to understand the costs involved in the supply chain and closer evaluation of inventory performance – eliminating potential sources of invalid traffic (IVT).

2. Assess DE&I and sustainability impact

A key consideration and deliverable during this new phase of SPO, is your brand’s diversity, equity & inclusion (DE&I) and sustainability credentials.

If you reduce your number of partners or pivot to new ones, it’s important to guard against any dilution of your DE&I commitments.There are resources such as the ANA’s Resource List of Certified Diverse Suppliers for Marketing/Advertising to help the process. But really, the most impactful way to drive this agenda is simply to engage with prospective partners about it. Make DE&I enablement part of your supplier-selection criteria.

Optimizing ad supply can have a major impact on the sustainability of campaigns – and the opportunity is enormous, as digital ads contribute 7.2 million metric tons annually, according to Scope3’s State of Sustainable Advertising Q2 2023 Report. Consolidation strategies involving fewer DSPs or SSPs means fewer intermediaries in the supply path – every reduction in intermediary is a reduction in energy consumption.

Again, the key is making sustainability criteria part of your advertising partner selection. While you can't stop a publisher from putting 70 SSPs on their ads.txt and in their ad stack (driving multiple energy-heaving auctions and reselling), you can choose not to participate in bidding for inventory from such publishers.

This helps create a commercial imperative for suppliers to improve their sustainability practices and technical infrastructure. Additional guidance on sustainability in programmatic can be found in the IAB Tech Lab Sustainability Playbook.

3. Consider the potential loss of operational efficiencies

If you opt to take a shorter supply path, by removing either DSPs or SSPs from your campaign activation, you won’t be swapping like-for-like. Your supplier relationships , the service and insight, and your responsibilities will all be different. Not worse, just different.

Traditional DSPs have worked long and hard to build out their infrastructure, their connectivity to audience data, their third-party monitoring, and their ability to optimize data in the digital advertising space. So if you switch to an SSP that’s moved into this space, its service is unlikely to be on the same level as some of the larger and more sophisticated DSPs – and you may well lose some sophistication in signals, in audience reach and definition.

Similarly, the reverse is true if moving away from SSPs – but with potential reduction in operational efficiencies across publisher side partnerships, technology, services, and solutions.

So key to this step in your SPO is evaluating whether efficiencies and economies gained outweigh what you lose. Determine which of those data points, capabilities, services or signals are really relevant to achieving your strategic goals. For example, if you’re reducing SSP involvement, make sure that you can afford to lose any proprietary publishers or proprietary data connected to those SSPs.

But if you select your partners and platforms with care, it’s quite possible that having fewer signals and solutions to work with might be a good thing. You’ve stripped away all but the most important ones and can operate with greater efficiency and focus.

4. Find what works and be agile

Finding out where and how the shifting landscape can deliver greatest value is central to this new form of SPO. With the advertising options and opportunities changing, with boundaries being redrawn and supplier relationships being redefined, there’s a strong case to test and learn through the consolidation.

Ask yourself, from a platform activation perspective, what do I need? And, do I need the same thing across all my brands and all my strategies? Opportunities to gain efficiency by using a truncated supply path may vary across campaigns, industries and tactics.

So analyze your data closely, and enjoy the option of being agile in how you approach SPO. As industry consolidation presents you with more options, the opportunity is there to build stronger relationships with suppliers that help you deliver against your strategic goals.

Opportunity in disruption

These major shifts in the adtech ecosystem present both challenge and opportunity. Market forces have created the option to remove technology partners from your advertising supply chain. But doing so will require a degree of relearning the dynamics, taking on different responsibilities and establishing new best practices. Of course you don’t have to change anything. But by applying new SPO strategies, if the blurring of DSP and SSP roles can provide tangible benefits, you’ll be in a great position to grab them.