What’s Hidden Behind the Rise of SPO or “Everyone is a fan of transparency until it’s their turn”

Mar 28, 2024

The advertising industry has started positioning SPO as the prime solution for sustainability-minded marketers. Rather than solely focusing on maximizing return on ad spend, marketers now have the opportunity to minimize emissions generated by programmatic advertising’s duplicate ad calls. At first glance, this appears to be a logical decision. However, is it truly that straightforward?

Let’s start from scratch to set the record straight. Simply put, supply-path optimization (SPO) is the strategy of detecting the quickest and most beneficial route to advertising space for demand-side platforms, bypassing dozens of intermediaries. This three-letter buzzword is now confusing for many people, and many have already lost the meaning and origin of the issue. That’s why we will analyze all this in the article.

Table of Contents

Why does SPO matter?

Supply-path optimization evolved alongside programmatic advertising, addressing challenges of transparency and efficiency. SPO originated from the need to navigate the complex ad supply chain, where multiple intermediaries may be involved in the buying and selling ad inventory. Advertisers sought greater control over where their ads were placed, the inventory quality, and the transaction process’s efficiency. By analyzing data and leveraging technology, advertisers, and publishers began implementing SPO strategies to identify the most effective and transparent paths for ad transactions. Enabled by technological advancements and industry standards, SPO analyzes data to select the most efficient paths for ad inventory. It’s a dynamic process that is continually refined to adapt to changes in the advertising field.

Advertisers are redefining the traditional roles of DSPs and SSPs in the quest for a transparent, cost-effective pathway from marketer to publisher. DSPs are starting to resemble SSPs, and vice versa, particularly evident in the video and connected TV sectors. For instance, The Trade Desk introduced OpenPath, a DSP directly connecting with publishers. This blurs the lines between DSPs and SSPs, essentially bypassing one or the other, albeit with claims of maintaining their distinct roles.

This shift towards supply-path optimization has significant implications for intermediaries in the programmatic advertising landscape. It reshapes their strategies, alliances, and added-value propositions. As advertisers and publishers increasingly emphasize transparency, efficiency, and performance, intermediaries must evolve to meet these changing demands. Adapting is crucial for them to remain competitive and relevant in the market.

What about publishers? SPO is less of a concern for reputable publishers with genuine value propositions. In fact, it could benefit them by streamlining ad paths and directing more revenue their way. By focusing on curated marketplaces, publishers can maintain their integrity and attract advertisers seeking quality inventory. In essence, SPO serves as a mechanism to weed out cluttered paths and drive higher yields for deserving publishers.

Publishers Were Not a Part of the Deal?

In the programmatic world, advertisers seek cost efficiency while publishers aim for increased revenue. However, implementing Supply-Path Optimization introduces complexities into this equation, prompting scrutiny of its effectiveness and fairness.

Recent flagship SPO-based products like ClearLine, OpenPath, and Activate by Pubmatic highlight this tension. While Pubmatic’s offering leans more towards publishers, the adoption among publishers remains cautious. ClearLine and OpenPath, for instance, raise intriguing questions by selectively engaging with a limited number of premium publishers, leaving others out of the equation.

Discussions surrounding SPO often center on unintended consequences, such as the potential for legitimate publishers to lose access to buyers. However, SPO primarily targets the correction of egregious practices among publishers. For example, excessive auctions initiated by low-quality publishers in open RTB markets have led to declining prices. Advertisers seeking reliability are increasingly gravitating towards private and curated marketplaces.

We still need to figure out what we must do to include all trustworthy independent publishers in the big game, as they are also part of the programmatic world.

Something is Still Wrong with SPO

The narrative surrounding global Supply-Path Optimization raises critical questions about the power dynamics at play, particularly regarding the ability of large corporations to select their preferred supply partners, potentially creating a walled-garden scenario. However, considering this logically, what are the implications of such a trend?

Take, for instance, a company claiming to offer a solution connecting advertisers directly to top publishers, bypassing SSPs. This promises cheaper traffic without intermediaries. Yet, it’s inevitable to wonder about the temptation to inflate prices in such a scenario. After all, business is ultimately about profitability.

On the other hand, there’s a persistent discourse on transparency within the AdTech industry. Despite the rhetoric, much of the industry thrives on opacity. While openness is lauded, many continue to prioritize maximizing profits, a goal inherent to top management. Thus, even if a singular, innovative SPO-based platform emerges, eliminating intermediaries, it risks monopolizing the market and driving prices upward.

This dilemma underscores a fundamental aspect of market dynamics. While pursuing efficiency and cost reduction is desirable, it’s essential to consider the broader consequences and ensure that such initiatives do not inadvertently lead to market consolidation and price hikes. Striking a balance between innovation and market fairness remains a paramount challenge in the digital advertising field.

Some Thoughts About SPO

Here are some quotes about SPOs from market players. We have selected a few of the most apt ones, but for a clearer understanding, we advise you to read the full versions of the materials we refer to.

Brian O’kelley, co-founder and CEO, Scope3:
“I don’t think that SPO is necessarily good or bad for publishers. The question is really about, is the full bid being expressed? How does the publisher kind of arm up against a very aggressive buyer? Imagine one massive buyer that can see the full supply chain and says, well, I’m not going to express my full value. I might be willing to pay $10, but I’m only going to bid $2, or $1, or $0.50. And this is the tension in any auction, or any kind of competitive marketplace—who fights back for the publisher?”

Terry Guyton-Bradley, a programmatic strategist and co-founder of MediaZinc:
“Unfortunately, most publishers don’t have the resources or time to truly analyze their programmatic partners in order to make meaningful changes to their programmatic stacks. As you can see [from the survey results], the economy is having a significant impact on our industry and causing drastic cuts to investment in technology and personnel.”

Krzysztof Franaszek, founder of Adalytics:
“There’s a real-world cost to buying through 10 supply paths rather than one supply-path for the same inventory. People have a moral and economic imperative to consider those costs.”

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Can SPO Save a Day?

The solution can be found at the intersection of obstacles that arise when implementing it. On the one hand, SPO holds promise in addressing the longstanding issues of transparency, efficiency, and quality control within the programmatic advertising ecosystem. It empowers advertisers to make more informed decisions, maximize ROI, and improve campaign performance. Furthermore, it has the potential to benefit reputable publishers by streamlining ad paths and directing more revenue their way.

However, the rise of SPO also brings forth concerns regarding market consolidation, power dynamics, and potential price inflation. While the intention may be to optimize ad transactions and enhance transparency, there’s a risk of inadvertently creating a walled-garden scenario where large corporations dominate and smaller players are left behind.

Ultimately, the effectiveness of SPO depends on striking a delicate balance between innovation and market fairness. It’s imperative to ensure that initiatives to optimize supply paths do not lead to unintended consequences such as market monopolization or price hikes. As the industry continues to navigate these complexities, the true impact of SPO on the future of digital advertising remains to be seen.

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