Supply Path Optimization (SPO) in Programmatic: A Complete Guide

The programmatic advertising landscape has become increasingly complex in recent years. With the rise of header bidding, publishers are now working with multiple exchange partners simultaneously, which adds an additional layer of complexity to the supply chain. This is where Supply Path Optimization (SPO) comes into play. In this blog post, we will explain what SPO is, how it works, and why publishers should care about it.

What Is Supply Chain Optimization (SPO)?

SPO is an algorithm that works to reduce auction duplication and ad discrepancy and helps the buyer find the most efficient and direct route to a given ad impression. In practice, it’s about eliminating the number of intermediaries (SSPs/ ad exchanges) that buyers work with. SPO is usually performed by demand-side platforms (DSPs) to help buyers find the shortest and most efficient supply path in a programmatic auction.

History of SPO

Header bidding became an industry-standard in 2014. This monetization technique allows publishers to collect bids from many demand partners in real-time bidding (RTB). However, because publishers are now working with multiple exchange partners simultaneously, this creates an additional layer of complexity in the supply chain. In addition, each SSP operates its auction logic, which adds even more complexity to the bidding process.

However, from the buyer’s perspective, it doesn’t guarantee that each SSP will bring an exclusive supply because SSPs may forward the same ad requests to the DSPs, resulting in auction duplication. In this case, the advertisers may be unknowingly competing against themselves. Therefore, buyers need to determine which intermediaries are truly adding value. And this is how supply path optimization has emerged.

How does SPO Works?

There are multiple factors that the model takes into account to optimize the supply path, such as the type of inventory (web, mobile, app), ad viewability, historical performance, and geography. SPO is an algorithm that works to reduce auction duplication and ad discrepancy and helps the buyer find the most efficient and direct route to a given ad impression.

Some DSPs are already equipped with algorithms to analyze SSPs in real-time to choose the most relevant ad inventory and adjust bids accordingly. These algorithms can also remove duplicated bids. Industry leaders predict that SPO features will become even more robust in the future.

Why Should Publishers Care About SPO?


According to an IAB research, 87% of brands, agencies, and DSPs are actively implementing SPO. Some DSPs are already equipped with algorithms to analyze SSPs in real-time to choose the most relevant ad inventory and adjust bids accordingly. These algorithms can also remove duplicated bids. Industry leaders predict that SPO features will become even more robust in the future.

SPO benefits both sellers and buyers because it helps build a more transparent supply chain, optimize the user experience, and increase trust between all parties in the programmatic auction. Publishers often think that more SSPs equal better yield and, ultimately, revenue. However, in practice, it’s more complex than that. Working with an unnecessarily high number of SSPs can increase page latency and worsen the user experience. Moreover, a complicated supply path involves more hidden fees and charges that are impossible to attribute.

How is SPO Facilitated?

SPO is facilitated by demand-side platforms (DSPs), which use algorithms to analyze SSPs and choose the most efficient supply path for a given ad impression. DSPs also work to eliminate duplicated bids and reduce ad discrepancy, further optimizing the supply path.

Publishers can also facilitate SPO by carefully evaluating their relationships with SSPs and optimizing their supply paths accordingly. This involves finding a balance between working with enough SSPs to maximize yield and revenue, while also avoiding unnecessary intermediaries that can harm the user experience and lead to hidden fees and charges.

For small to medium-sized publishers, working with a monetization platform like Matterfull can be an effective way to facilitate SPO. Matterfull’s header bidding wrapper connects publishers with industry-leading SSPs, allowing them to maximize yield and revenue without the added complexity of managing multiple SSP relationships.

Conclusion

Supply path optimization (SPO) is a critical concept in programmatic advertising, allowing buyers and sellers to create more transparent, efficient supply chains that benefit all parties involved. By eliminating unnecessary intermediaries and optimizing the supply path, SPO can lead to cost savings, improved performance, and better user experiences.

For publishers, SPO is essential for maximizing revenue and attracting new demand from advertisers. By carefully evaluating their relationships with SSPs and working with a monetization platform like Matterrfull, publishers can optimize their supply paths and achieve the highest possible yield without harming the user experience.

As the adtech industry continues to evolve, SPO is likely to become even more important for publishers and advertisers alike. By staying up-to-date on the latest trends and best practices in SPO, publishers can position themselves for long-term success in the programmatic advertising landscape.