Commentary

Can Supply-Path Optimization Deliver Supply-Side Transparency?

In January, at the IAB’s Annual Leadership Meeting, P&G Chief Brand Officer Marc Pritchard served notice to the digital marketing ecosystem, saying that P&G demanded transparency from agencies and vendors.

Pritchard said P&G won’t "waste time and money on a crappy media supply chain."

Although there are some shoddy practices on the supply side, there are some scenarios that are legitimate, yet result in less than transparent results on the supply side. Let’s take a look at header bidding.

In order to level the playing field for Supply Side Platforms (SSPs) with Google’s DoubleClick for Publishers, the leading SSP, header bidding opened up the traditional waterfall approach so multiple SSPs could submit bids simultaneously.

In theory, this practice should have resulted in more competition -- good for the entire industry. In practice in 2017, there are scenarios where one marketer could have bids being submitted from multiple DSPs via multiple SSPs for the same impression.

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Header bidding introduced a new level of arbitrage to programmatic advertising, which has undoubtedly contributed to the comments made by Pritchard and others in the industry. These actions took advantage of a loophole in the system. It wasn’t outright illegal, but the result was less supply-side transparency.

Another problem with header bidding is pricing transparency. With a second-price auction, the most common type of programmatic auction, the winning bidder pays the price of the second-highest bidder. But the winner has no way of knowing how much the second-highest bidder bid because that’s the SSP’s internal data.

In fact, even the publisher doesn’t know the actual prices of the first and second bidder.

Could you imagine a scenario where you sell your house and only the real-estate agent knows the bid prices your house received?

A third problem resulting from header bidding is the bad user experience brought on by increased latency on publisher sites. Before header bidding, a publisher asked one SSP to bid, and the process for real-time bidding was, well real-time.

Now, with header bidding process described above, the SSPs first send out queries for bids, and once the price has been determined, send a second query, which significantly increases the time it takes to serve an ad.

Though publishers can set specific timeout limits in order to reduce latency, this will result in fewer bids which might reduce the bid price.

According to Justin Festa, executive vice president of digital at publisher LittleThings: “As long as publishers are keeping bidders on page, header bidding will still create latency problems.”

Although Supply Path Optimization is demand-friendly, enabling the reduction of costs and the improvement of ROI on the demand side, that doesn’t mean that it hurts publishers. AppNexus CEO Brian O'Kelley noted that Supply Path Optimization did not seem to impact CPMs paid to publishers.

O’Kelley’s point is critical. Too often in digital advertising, we view things either from the supply or demand side. Yet for the industry to succeed, we need a more holistic view that benefits both sides of the equation.

Though there are a lot of challenges in developing technology to efficiently and effectively manage supply path optimization to benefit both the supply and demand-side, the transparency issues addressed by P&G earlier this year are real and pertinent.

Only by addressing outstanding issues like supply-side transparency can we bring digital advertising to its rightful position as the leading marketing channel.

 

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