Supply path optimization (SPO) in programmatic advertising is a strategy advertisers use to streamline and improve the efficiency of the digital ad buying process.
Essentially, it involves identifying and using the most direct and effective pathways to purchase ad inventory, ensuring that ads are delivered through the highest quality and most cost-effective channels.
To better understand this concept, think of it like a logistics company looking for the shortest and most reliable routes to deliver packages.
Just as a logistics company aims to avoid unnecessary detours and delays to ensure timely and efficient deliveries, SPO helps advertisers avoid inefficient or redundant ad exchanges, ensuring their ads reach the right audience at the best price.
What Is Supply Path Optimization?
Supply path optimization is a method that allows advertisers to minimize the number of exchanges with a demand-side platform (DSP) to find the most efficient path to ad inventory. It cuts out unnecessary intermediaries and reduces redundancies and duplications.
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According to Will Doherty, VP Inventory Development at The Trade Desk: “With performance SPO, in time, the advertiser will be able to winnow down the most efficient paths and deprioritize those exchanges that aren’t delivering value.”
To understand why SPO is necessary in programmatic advertising, we need to understand header bidding. Header bidding is a technique where publishers offer their inventory to multiple ad exchanges simultaneously before making calls to their ad servers.
This allows publishers to receive bids from multiple demand sources at once, increasing competition and potentially driving up the price of the ad space.
While header bidding benefits publishers by maximizing their revenue, it also introduces multiple pathways and a lot of data for advertisers to navigate through, making it harder to identify the best routes for ad purchases.
This complexity necessitated the development of SPO to help advertisers manage these numerous pathways effectively, ensuring that they still achieve optimal ad performance without overspending.
How Supply Path Optimization Works
Supply Path Optimization (SPO) works by analyzing and refining the various routes through which digital ad inventory is purchased. The goal is to eliminate inefficient or redundant paths and prioritize those that offer better transparency, higher quality inventory, and cost-effectiveness.
Here’s a brief explanation of how it works.
1. Data Collection
SPO begins by collecting data on all the paths available for buying ad inventory. This includes information on various supply-side platforms (SSPs), ad exchanges, and intermediaries involved.
2. Analysis
The collected data is analyzed to assess the performance, cost, and quality of each path. Metrics such as fill rate, bid response times, transparency, and ad viewability are considered.
3. Path Evaluation
Based on the analysis, the most efficient and effective paths are identified. Inefficient or redundant paths that increase costs without adding value are eliminated.
4. Optimization
The strategy is refined to prioritize the best-performing paths. This ensures that ad spend is focused on the highest quality inventory and the most reliable supply sources.
5. Continuous Monitoring
SPO is an ongoing process. Continuous monitoring and adjustments are made to adapt to changes in the ad market and to ensure the strategy remains effective over time.
When Should You Implement SPO?
If you notice inefficiencies or rising costs in your programmatic ad buying process, it might be time to consider implementing SPO.
There are also key moments and triggers in your advertising strategy that may require the use of SPO tactics, such as:
- After introducing header bidding: Since header bidding increases the complexity of the ad supply chain, SPO helps manage and streamline these new paths.
- During budget optimization: To maximize your return on ad spend (ROAS) by ensuring every dollar is spent efficiently.
- To improve transparency: SPO can provide better insights into where and how your ads are being placed.
- For better performance: When you need to enhance overall campaign performance by ensuring ads reach the right audience through the best channels.
5 Benefits of Supply Path Optimization
The numbers speak for themselves: in 2022, “60% of the buyers actively implemented SPO strategies to purchase an impression, whereas 95% would boost their SPO efforts to find the most effective SSP path to the publishers,” according to a report by Integral Ad Science.
So let’s take a look at five of the top benefits behind the growing popularity of SPO—and why you should be using it, too.
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1. Budget Control
SPO helps you manage your budgets more effectively by eliminating inefficient or redundant pathways, directing ad spend toward the most cost-effective and high-performing channels to reduce wasted spend and maximize ROAS.
2. Quality Control
By prioritizing high-quality inventory sources, SPO ensures that ads are placed in premium environments, reducing the risk of ad fraud and enhancing brand safety.
This focus on quality improves the overall effectiveness and impact of advertising campaigns by making sure your ads are relevant and maintain brand safety.
3. Revenue Opportunities
Optimizing supply paths can unlock new revenue opportunities by connecting advertisers with better-performing inventory sources and audiences, leading to higher engagement rates, better conversion outcomes, and more revenue.
4. Supply Chain Visibility
SPO provides greater insight into the ad supply chain, allowing you to understand the various intermediaries involved in delivering your ads.
Having more visibility helps you identify and eliminate inefficient or opaque pathways, ensuring a more streamlined and effective process.
5. Transparency
With SPO, you gain better transparency into where and how your ads are being placed, including detailed information about each supply path.
This transparency builds trust and allows for more informed decision-making, ensuring that ad placements align with brand goals and standards.
How to Incorporate SPO into Your Programmatic Ad Strategy
If you’re ready to start improving the efficiency of your campaigns with SPO, here are five best practices that will help you achieve optimal results.
1. Conduct Internal Assessments
Start with a thorough internal assessment to understand your current ad buying processes, paths, and performance.
Analyze existing data to identify inefficiencies, redundant intermediaries, and underperforming supply paths. This assessment forms the baseline for your SPO strategy.
2. Consolidate Intermediaries
Simplify your supply chain by consolidating intermediaries. Work with a smaller, more efficient group of SSPs and ad exchanges that demonstrate high performance and transparency. This reduces complexity and improves control over your ad spend.
3. Utilize Ads.txt and Sellers.json
Ensure your partners are leveraging industry standards like ads.txt and sellers.json to increase transparency and combat ad fraud.
Ads.txt allows publishers to list authorized sellers of their inventory, while sellers.json provides transparency into the entities involved in the selling process. Verify these files regularly to maintain a clean supply chain.
4. Analyze Performance
Regularly analyze the performance of your supply paths. Use key performance indicators (KPIs) such as fill rates, bid win rates, viewability, and ROAS to evaluate which paths are delivering the best results. This data-driven approach helps in making informed decisions about which paths to prioritize or eliminate.
5. Continuous Optimization
Treat SPO as an ongoing process rather than a one-time task. Continuously monitor and adjust your strategies based on performance data and market changes. Stay updated with industry trends and advancements to keep your SPO strategies effective and aligned with your business goals.
Need Some Help with Supply Path Optimization?
If you’re ready to start improving the efficiency of your campaigns with SPO, Grapeseed Media can assist you every step of the way.
Our team of programmatic advertising experts will help you conduct comprehensive internal assessments, consolidate intermediaries, and continuously optimize your strategies.
Get in touch with Grapeseed Media today to learn more about how we can help you implement and benefit from Supply Path Optimization.
Let’s streamline your digital advertising together!