Supply Path Optimization: The Kiss of Death to SSPs

Over the last year, the ad tech industry has witnessed the fast rise of header bidding and similar publisher-side mechanisms aimed at unifying programmatic auctioning for a given impression.

For demand-side platforms (DSPs), this means more liquidity, but also a three-fold increase in the volume of bid requests to handle. In the old waterfall auctioning model, only one impression was sent to many buyers, whereas header bidding is fundamentally a “many-to-many” model. Craig Mytton illustrated this mechanic perfectly in a LinkedIn post last year.

As a result, DSPs are now flooded with duplicated impressions, threatening the stability of their platform and the integrity of their campaigns.

“Header Bidding has an exponential effect on the volume of impressions received from publishers” noted Ian Trider, Director of RTB platform operations at Centro, a DSP. “Two header bidding buyers means twice the number of impressions sent, three header bidders mean three times more impressions, and so on.”

With 70% of top publishers using header bidding, this redundancy will have a profound impact on the business dynamic among programmatic actors. At the same time DSPs will be forced to de-dupe impressions, the economics along the supply chain will become more transparent.

Middlemen’s Margins in Full View

For the first time, DSPs can see how aggressive intermediaries are along the supply chain. Brian O’Kelly provided sample math in a recent blog post. In short, SSPs that bid highest will maximize revenue in the short term, but undermine campaign performance in the long term.

Like AppNexus, DSPs are responding with supply chain optimization (SPO), essentially prioritizing which SSPs are allowed to submit bids for a given app. Basically, the old publisher-side waterfall is being replaced by an advertiser-side whitelist. Only supply sources on this whitelist are allowed to send impressions for a given page or app.

In time, I believe machine learning will make these whitelists more dynamic and efficient. Looking at recent bid patterns and fill rates per ad placement, DSPs will predict which SSPs or supply sources they should privilege when bidding.

This new practice of supply path optimization will become part of any modern buying stack.

Eco 101: Perfect Competition Equals No Margin

For SSPs, this is bad news.

This pricing transparency, along with low switching costs, will put pressure on their margins.

Whichever SSP charges the highest margin will quickly see their fill rates tank, as DSPs around the world shift their buying pattern to other supply sources available for the same publisher.

OpenRTB recommends the domain name or app bundle in any bid request, so DSPs can easily identify who the originating publisher is.

IAB and TAG will do their bit by offering mechanisms within the bid stream to uniquely identify a placement across platforms. There is also discussions of  each intermediary adding a “stamp” to the ad chain, similarly to the blockchain of a bitcoin.

Reselling premium inventory will become a lot harder for those platforms that do not have access to valuable data or failed to lock exclusive access to supply.

The Mobile Browser is dying

Comscore’s latest report confirmed what everybody already knew: consumers mostly use mobile apps, desktop is becoming a niche play and mobile browsers will soon be a thing of the past.

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For ad platforms, this has profound implications. Selling monetization services to app developers is a totally different ballgame than convincing media folks to throw a new ad tag in their ad server.

Also, apps developers have historically favored more “native” advertising units over low-CPMs banners.

MoPub, Smaato and other pioneers in the programmatic native app space gained prominence by distributing broadly their advertising SDKs in the early 2010s.

SDK no more

The business is changing, however.

No developers want to add “yet another SDK” to their app. As networks become more sophisticated, and HTML5 gain traction, calling an ad network endpoint become a viable options for developers to retrieve ads.

In parallel, video and native video advertising is opening new opportunities. For example, Video CPMs and higher fill rate are high enough to entice game developers to offer watching ad as an alternative to in-game purchases.

 

 

 

 

 

 

 

The Future of Header Bidding is Server-Side

 

It’s been a little over a year since header bidding became mainstream, and the technology has been adopted by half US premium publishers to deliver ads programmatically.

As a result, competition is heating up. Where previously tech companies were looking for a solution to appease their publishers, there is now a battle for market share. AppNexus announced PreBid pro last month as an enterprise-class upgrade to its popular Prebid.js open source wrapper. OpenX has announced header bidding for in-app. Index is betting the farm on its black-box, fully supported solution. Inversely, Rubicon admitted its costly mistake in not developing an offering.

Yet as these offerings hit the market, a fault-line is emerging between two distinct camps: the client-side wrapper versus the server-side wrapper. Client-side wrappers gives publishers full control over their monetization without costly data centers. SSP-managed server-side wrappers gets publishers up and running quickly, but the SSP has a say when adding new demand sources.

Ultimately, publishers will pick server-side.

Once upon a time, wrappers were all client-side

Client-side wrappers have been around since the early days of header bidding. Pioneers like RTK didn’t have the infrastructure to handle complex real-time bidding (RTB) auctioning within their data centers, so writing client-side software was an easier start.

On the pub side, early adopters were willing to deal with the complexity and limited feature set of these early javascript wrappers, attracted by the transparency and revenue gains offered by header bidding’s holistic yield management.

But as more of publishers’ traffic shifted to header bidding, the complexities built up. Robust analytics became a priority, more buyers needed to be added and finally privacy came to the forefront. Not surprisingly, header bidder wrappers are now big, hairy pieces of software, delivering mission-critical functions from the inherent flimsiness of browsers. The Prebid.js open source framework saw 17 releases in one year, and now comes with 27 built-in demand partners.

Operational Management and Latency Concerns

Some vendors responded to this complexity by moving the most critical functions of header bidding away from the user’s browser and into their data center. Moving the most complex functions of header bidding to the server presents several advantages.

First, powerful vendor servers provide a more reliable and scalable environment for executing really complex tasks like real-time bid optimization and fraud detection.

Second, server-side wrappers are a lot easier to implement. In many cases, header bidding tags are like regular tags that publishers can copy from a self-service console and paste into their CMS. That’s all it takes.

Third, complex client-side code is more likely to slow down publisher pages. Beside the bandwidth required by a bigger payload, there are limits to the number of connections the browser can keep open, obliging some level of serialization of the bidding workflow beyond a certain number of real-time buyers.

Whose Data Center?

It’s therefore no surprise that server-side wrappers are becoming more popular. But that does not mean that client-side wrappers will go away. Far from it. For publishers with deep technical resources, client side wrappers will stay the preferred header bidding implementation for the foreseeable future. Client-side wrappers stay fully within the control of the publishers, allowing them to build and maintain the checks and balances that suit their business.

At some point, publisher will have the expertise to host server-side header bidding within their data center.

But for now, SSP-managed header bidding is the best solution for publishers who want to embrace header bidding rapidly and with minimum tech investment.