The need for Supply Path Optimisation

Authored by Anil Pandit, SVP, Publicis Media.

With the surge in newer channels and formats, Supply Path Optimization (SPO) and transparency have emerged in the marketplace as key focuses of supply. The landscape consists of several marketplace challenges to transparency as well as industry-led initiatives to push for increased transparency in order to optimize supply paths. I will try and cover few key definitions, industry initiatives, challenges, and opportunities pertaining to this topic so that all of us are better informed to take steps towards increasing supply transparency and optimization.

Some Industry Transparency Initiatives

After all, what is Supply Path Optimisation?

The idea of Supply Path Optimisation, or SPO, is the understanding of what share of the advertiser’s budget is used to buy reach on a site (the working media dollar), versus the share spent on partners like technology, data and agency fees.  

An optimized supply path streamlines the path to audience by maximizing working media dollars, without sacrificing brand safety and inventory quality. Supply Path Optimisation relies heavily on supply transparency. As advertisers and buyers, we want to understand how our “working media dollar” is being distributed throughout that path and determine how much of it is going to vendors versus how much is going to the publisher’s inventory. Although many of the technology partners add value to the supply chain, there are still some vendors where that is not always the case. For example, when you start to buy from supply resellers, campaigns risk brand safety concerns, hidden fees, and performance issues.

Supply Transparency

Supply transparency continues to evolve as new standards and solutions become available to the marketplace. The goal of industrywide focus on supply transparency is to increase buyer confidence in the supply path by providing the tools and tech specifications which clearly layout the path from buyer to audience, revealing all sellers along the way.
Marketplace Challenges

Challenges around supply vulnerabilities include ad fraud, duplicated inventory, and non-transparent tech taxes further complicates the decision of from whom & where to access inventory. 

Tech Fees

The key question: What tech fees are being charged by which partners?
There are many technology and ad verification vendors that extract fees. Not all fees are bad. In many cases, where those fees come from is not clear. Multiple vendors across the supply chain can extract additional fees, facilitated if there is a lack of transparency with partners.

The term “fee” on the supply side is used in various ways. Fee structures can often create transparency challenges. As such, it is helpful to break down the common concepts:

• Technology Fee: The cost to use technology & access to an impression
• Floor Rates: Prices that publishers or SSPs set to ensure that ad inventory meets a minimum price
• Post Auction Discounts: Discounting that allows marketers negotiate discounts on deals without impact to win rate
• Take Rate: The fee a supply platform applies to an impression’s bid price.
• Platform Fees: Supply Platform fees are typically structured as Revenue Share Fees that are passed to the publisher and not paid on the buyer side.

Why the Supply Path Matters

SPO can be interpreted as a “toolbox of strategies and tactics to access a publisher’s inventory through the most efficient route.”Metrics that help define your SPO strategies can vary, but the key theme is making intentional choices about where you buy and transact inventory to fulfill campaign goals. Some considerations for SPO include: 

• Quality of inventory/ marketplace
• Media cost
• Transparent inventory
• Number of hops in the supply chain

Finding quality impressions at scale with competitive Pricing will include 3 tasks:

• Cost Control is the baseline performance SPO strategy
• Access& Scale is an SPO strategy focused on performance and Partnerships
• Inventory Quality is focused on partner management SPO

SPO Activation Best Practices

Test and Learn 

Test and learn is essential to a successful SPO strategy, buying teams must go through consistent benchmarking and strategy refreshes to pace with a dynamic demand based marketplace. 

Bottom-line, performance is a contributing factor in SPO. When implementing an SPO approach, conversion and performance should be the factor for determining what levers (between rates, quality and scale) make performance pop. Buyers must take a balanced approach when managing campaign optimizations & SPO – favoring a single optimization lever can impact performance and your overall SPO approach

A Holistic Approach to SPO typically should involve 2 approaches:

1. Optimising Aggregated Inventory Platforms: This involves monitoring cost, scale and quality across supply at the URL level, paring down supply partners based on partners and prioritizing pipelines that are verified, continuous management of inclusion/ exclusion lists to maintain quality and content standards and ensure complaint ads.txt seller status
2. Optimising publishers: This will include partnering with digital investment counterparts to negotiate priority and attribute spends across all publisher access points against spend endeavors, evaluating CPMs across Direct IOs, PGs and PMPs and open exchange to inform rate negotiations, leveraging PMP pipelines for transparency, quality and rate guarantees and delivery against priority audiences and understanding the value of a publisher’s designated supply partner and adjust deal types as needed.

As one of the best practices that Publicis follows is the use of our ‘’Verified’’ process launched in 2010, which entails a rigorous, multi-level evaluation of the top companies/partners in a variety of categories, their global capabilities as well as in-depth systems/ service tests (where applicable). Partners are classified by Strategic or Standard status and receive the Verified Approval for agency activation. Being Verified signals to the market that a partner meets or exceeds Publicis Groupe benchmarks & standards and has received its stamp of approval. Publicis Groupe continuously re-evaluates vendors on an annual basis, ensuring that vendors enhance and evolve their offerings and solutions, as well as maintain up-to-date marketplace technology capabilities.

Like so many things in the digital advertising sphere, supply path optimization is not a simple or straightforward concept—but it is vital nonetheless. Using the approach outlined above can help improve SPO efforts and find the purest path to direct, cost-efficient, high-speed (and high-performing) supply.