Supply-path optimization, or SPO, is not a new concept.
SPO audits typically come in the guise of spreadsheets that are hundreds of cells long with requests for information (RFI) becoming increasingly familiar to ad-tech suppliers—especially as times become leaner.
While the consequences of the coronavirus pandemic have put a squeeze on ad spend and forced the industry to tighten its collective wallet, brands and agencies have been scrutinizing their programmatic supply paths since at least 2018 as part of an effort to track every dollar they spend and better understand where their digital ads run.
Teri Gallo, evp and general manager of marketplace at Kinesso, the marketing intelligence arm of IPG, said the goal of reviewing SSPs is to provide internal teams, clients and potential clients with a comprehensive, full view of the supply chain.
“Through our evaluations, we detail SSP offerings, value proposition, integrations, performance metrics, service levels, development plans, et al. All of this is done to provide an agnostic review of marketplace participants. This gives our teams the tools and resources they need to make informed buying decisions on behalf of our clients,” Gallo said.
Kinesso started its SPO process at its inception, in October 2019. Gallo said the SSP review, which is done in conjunction with the company undergoing evaluation, is an “ongoing practice” across IPG that progresses as the landscape and clients’ needs change.
One SSP said it received an RFI from IPG’s data-driven marketing unit around November. Another said it received the RFI earlier this year.
“The whole thing starts with, at a philosophical level, the recognition that there’s no need to transact through all of the exchanges that exist today,” said one of the sources involved in the audit, who requested anonymity due to the sensitive nature of their company’s relationship with IPG.
The initial purpose of an SPO audit is to whittle down the daunting number of exchanges on a given list of ad inventory suppliers to a core, or preferred, group of supply-side partners.
That preferred group is usually no more than 10 SSPs, and they generally cover the buyer’s bases, according to the sources. Left standing will typically be a small number of omnichannel SSPs, plus a combination of supply partners that cover specific devices types (like mobile and CTV), formats (like banner and native) and regions (depending on the buyer’s global scale).
Gallo said Kinesso isn’t “targeting a number” of preferred partners, but that it does prefer partners that are able to serve across device type, format and region.
Although the tests can be strenuous, the rewards can be lucrative. Being a preferred partner means a buyer—in this case, Kiness—will spend a large portion of its programmatic budget through an SSP’s pipes.
“They might not completely shut off the other partners, but they’re going to focus their volume on the selected partners in exchange for the selected partners delivering on the requirements included in that term sheet,” said the first source.
While the pandemic didn’t inspire Kinesso’s audit, it is accelerating the trend. The first source said their company has been getting multiple SPO-related RFIs each week in recent months. The second source said marketers have been acting quicker to implement the results of their audits since the outbreak.
What’s in the RFI?
While every RFI may not be an endless row of spreadsheets, they all generally ask the same questions about business practices. These include assessments of delivery practices, performance, technological capabilities (current and planned), scale, service levels, innovations, differentiated capabilities, solvency and ethics.
“Quality, safety, transparency, capabilities, and innovation were—and will continue to be—critical elements in our reviews,” Gallo added.
The RFI typically starts broad and then asks for specifics. It will ask about a company’s vision, how it differentiates itself, and what a supplier’s product roadmap looks like.
Next will be the little details. How transparent is an SSP’s fee reporting? Does it provide log-level data? How scaled out is its access to supply, and is it unique? Additional queries may revolve around how an SSP is adapting to the phasing out of third-party cookies.
What did Kinesso ask in its RFI?
- Provide monthly reporting on fees, win rate, CPM
- What is your take-rate?
- Are you enforcing ads.txt and do you disclose sellers.json?
- Is all of your inventory brand safe?
- Provide supply onboarding methodology with regular updates (keep us informed as your supply grows)
- Provide details on publisher integration (Prebid, Google Open Bidding, SDK or tag, for example)
- Do you support inventory block lists?
- Do you support Acxiom data? (This is IPG’s answer to the cookie problem. It bought Acxiom in 2018.)
- Do you support the most recent OpenRTB standards?
Chris Kane, CEO of programmatic ad consultancy Jounce Media, said savvy marketers want to better understand the intricacies of auction dynamics to know exactly where their money goes: “For performance and strategic reasons, marketers want to know who are all the companies or pieces of technology that are touching [their] bid on its way to the publisher.”
For example, if the SSP integrates with a publisher through Prebid, an open-source header bidding tool, then there’s no extra fee. There is a fee, however, if the integration is through Google Open Bidding, a server-side tool.
Understanding fees also gives marketers leverage to negotiate take-rates with SSPs and draw a line in the sand over how much in fees they’re willing to pay.
Once an SSP submits an RFI, a waiting game starts.
“They’ll be kind of radio silent for three, four, sometimes five months,” said the first source.
Then comes customization
Once an ad-tech supplier makes it through an RFI process, then it’s time to settle on terms. This is where the goals of the marketers start to differ.
One source involved in Kinesso’s process said that without having a direct relationship with an SSP, large agencies can’t throw their weight around during negotiations. This is because SSPs grapple over fees with publishers, not the buy-side. “If you’re one of the big holding companies, that fact should annoy you. So, as you narrow down your partners, you’re going to say, ‘Alright guys, I spend a lot more money than others, where’s my volume discount?’” said the third source.
Gallo claimed IPG doesn’t execute guaranteed agreements for any trade benefit, but that the holding company always looks for ways to increase performance and efficiency.
“We are in vigorous pursuit to appropriately reduce tech taxes, whether through proprietary technology, commercials or other means,” Gallo said.
Another potential requirement to become a major media agency’s preferred exchange includes the provision of bespoke reporting, such as log-level data, anti-fraud remediation, reimbursement of buyers for invalid traffic (aka fraud), or to build a custom product to solve a specific problem.
Now that a higher percentage of spend goes through a fewer number of SSPs, innovation and customization between marketer and SSP is more impactful.
“And, as a result of that, I think many holding companies are looking at what that could mean. What can an SSP build for me that would be unique? There’s a lot of RFIs for different projects as well,” said the third source.
Not every marketer-SSP arrangement gets put on paper. The sources said formal contracts are sometimes written up when agreeing on financial terms—unless the buy-side wants to start activating immediately and not wait through an arduous legal process for the green light.
“Depending on the partner and the type of relationship, we may put a commercial or compliance agreement in place. However, often this is not the case,” Gallo said.
And SPO arrangements aren’t always that strict. Being a preferred partner has a nice ring to it, but the marketer still decides where to spend, and the marketer can still direct that spend to the lower-tier SSPs that were cut out of the SPO audit from the beginning.
“We remain tech-agnostic. As an agent of our clients, it is our goal to evaluate all relevant and identifiable landscape participants for each of our evaluations,” Gallo said.
Sometimes a marketer wants to buy a certain publisher, and that publisher only works with non-preferred SSPs. Sometimes a marketer wants to activate in a certain country where the preferred partners don’t operate. And sometimes, marketers just have to hit their quarterly marks.
“If you’re underpacing and you have $1 million to spend and you have 70 hours to spend it, you’ll just turn on all of your exchanges to get delivery,” said the first source.