Supply path optimization gives media buyers the ability to bid on and win inventory at the most reasonable price, while it lets publishers maximize their revenue over the long run. There are many different paths in which an impression opportunity can go from the publisher to the DSP. The goal of supply path optimization is to create and utilize the most effective one.
What is Supply Path Optimization?
It is essentially an algorithm used by DSPs to streamline how they interact with supply-side platforms. Each DSP has developed its own strategy for supply-path optimization: Some use it to pick up the bids that are most relevant and have the highest chance of winning, while others use it to turn off SSPs that are not implementing second-price auctions. The rise of header bidding has caused the same piece of inventory to be available across multiple SSPs/Exchanges. In a single auction a DSP can be getting the same bid request from many different SSPs at the same time.
Benefits of Supply Path Optimization
- Reduce bid duplication by DSPs
- DSPs reduce bidding against themselves
- Reduces bad actors. The supply side cuts down on bid requests by sending requests that are most likely to win
- Cuts down on server costs (QPS) as DSPs have less bid requests to evaluate
- Simplify the supply chain
A Complex Web of Signals
How does supply-path optimization work?
For an example let’s say DSP A is trying to buy a 300×250 banner on businessinsider.com. DSP A may work with 3 exchanges that all have a direct integration through header bidding with Business Insider and they spread their budget out across these 3 exchanges. It’s the end of the month and DSP A pulls a 30 day report and notices on average they see the following results:
- Ad Exchange 1: $1.15 CPM and 30% Viewability
- Ad Exchange 2: $1.30 CPM and 40% Viewability
- Ad Exchange 3: $1.40 CPM and 70% Viewability
From here, the DSP may decide to cut spend with ad exchange 1 and 2 and only buy on ad exchange 3. Even through it is the most expensive, the increased viewability extremely important. There are other factors such as fraud score, discrepancy and others fees that could come to play in these decisions.
Sources
- https://digiday.com/media/what-is-supply-path-optimization/
- https://www.linkedin.com/pulse/demystifying-supply-path-optimization-nathan-woodman/
- https://digitaladblog.com/2017/09/09/supply-path-optimization-spo/
- https://www.adpushup.com/blog/explainer-what-is-supply-path-optimization/
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