How the Ad-Tech Supply Chain Is Being Compressed and Evolving

Under pressure to comply with privacy regulations and prove their programmatic ad buys are delivering value, marketers are looking to source ad inventory more directly—even as Google’s rollout of Open Bidding threatens to frustrate that. Additionally, media spend via supply sources that use ads.txt–an IAB-led transparency initiative–increased by 45% year-over-year in Q4 2019, while spending on less trusted sources, typically called “unauthorized resellers,” decreased significantly. These are some of the key findings in separate reports recently from BidSwitch, a company that builds the infrastructure of much of the ad-tech ecosystem, and Jounce Media, which just released its latest benchmarking report. Taken together, these reports highlight how marketers want a leaner supply chain, while keeping the addressability that's at the core of the ad-tech world. Privacy performance requirements drive SPO [article_summary section="1"]Barry Adams, general manager at BidSwitch, told Adweek the drive to prune the supply chain–commonly called supply-path optimization, or SPO–was driven by the need to comply with privacy regulations, as well as improving transparency. “Transparency promotes the value of direct transactions with publishers as well,” Adams said, commenting on the ads.txt initiative. “In addition, cost-effective ways to secure premium inventory is valuable knowledge for ad buyers as the world moves away from third-party cookies.” The increased focus on transparency, along with expanding privacy laws, also saw media buyers willing to pay a premium for direct transactions with publishers, demonstrated by higher revenue figures for media trading undertaken via private marketplaces. This trend is favoring publishers with BidSwitch data, which analyzes 50 trillion ad requests per quarter, demonstrating that ad prices conducted via private marketplaces are on average 3.2 times higher than inventory sold across open ad exchanges. Duplication remains, but for a reason [article_summary section="2"]Jounce Media’s study, however, found that auction duplication—in which a single ad impression is simultaneously offered to advertisers across a number of different ad exchanges—has seen a slight increase in 2020. On average, publishers used 21.6 supply paths in March 2020, up from 21.1 in February and 18.3 in January, partly the result of the sell side of the industry embracing Google Open Bidding, also known as Google Exchange Bidding, in Google Ad Manager. According to Jounce Media, Google Open Bidding presents marketers with an SPO dilemma. Even though many on the buy side want to reduce the number of intermediaries they work with, enabling Open Bidding improves auction win rates, which means they have to cut an additional check to Google. “We’ll see principals come closer together on both the supply and demand side," said BidSwitch’s Adams, "but that doesn’t mean the collapsing of the supply chain—it could just mean that we have a [smaller] more transparent supply chain.” For Adams, advertisers should know how each tier of the ad-tech ecosystem provides value before they decide which parties will lose out during SPO-driven reduction efforts. “I think that for agencies it will be a big thing," Adams said. "They’re starting to say to themselves, ‘Yeah, I’m interested in accessing that publisher, but do I need to see it across 14 different exchanges?’ And we all know the DSPs have been thinking about this for a while.” Brands now see data as a first-party asset Speaking with Adweek earlier in the year, an executive at a CPG firm—who requested anonymity due to their employer’s comms policies—said there are a lot of “wrong assumptions” around the wider trend of brands trimming their media supply-chains. “Many people think of in-housing as a binary decision, where you have no relationship with agencies and hire dozens of people, and that is one option,” the source said. “But there are so many different processes; you have to look at each and all of them, and then work out what the best solution for each is.” Meanwhile, on a webinar last week hosted by demand-side platform (DSP) Beeswax, Elisabeth Salway, global audience expert at Nestlé, explained how recent years have seen brands explore the option of taking more of their audience activation in-house. In many cases, this begins with brands working directly with data management platforms (DMPs), as their marketing departments increasingly deem audience data a first-party asset, and not just a tool to help performance on programmatic ad buys. “Once you have a DMP, then you start to think about owning your own ad server relationship and then also a DSP,” she said, adding that this has enhanced fee transparency. “The supply chain has become much more uncomplicated in terms of being able to access the different amounts [of margin and transaction fees] that’s being taken.” Brands build their own walled gardens [article_summary section="4"]Nathan Woodman, founder of Proof in Data and former CDO at Havas, said the privacy requirements brought on by legislation such as the California Consumer Privacy Act will likely lead to a wave of new companies in the ad-tech sector. “We are in the early stages of it, but I think it’s something that’s going to happen, particularly as all of the privacy requirements affect all the intermediaries,” he said. “In particular, I think we’ll see brands that own their first-party data create, in a sense, their own walled gardens by implementing their own clean rooms.” Such a scenario could involve brands, such as an ecommerce retailer or tech brand, push their first-party data directly to publishers for the purpose of audience targeting via third parties such as InfoSum—which was backed by AT&T’s Xandr recently—that would then protect any personally identifiable information. “The publishers could then fulfill that inventory via their own DMP to whatever the advertisers wanted to buy,” added Woodman.