Over the last year, we’ve seen an increasing trend wherein the definitive lines between buy side and sell side businesses have begun to blur, with DSPs attempting to control more of the programmatic supply chain by building SSP-like products (to ultimately cut out the SSPs).
We think that the two primary reasons DSPs are cutting direct relationships are an attempt to (a) tout their access to exclusive, premium supply, and (b) to highlight cost savings they can pass on to the customer.
“Myth #1: Direct publisher connections mean exclusive, higher quality supply”
The average RTB-enabled publisher monetizes through 23.6 directly integrated sell-side technology platforms and authorizes 11.6 of these partners to initiate resold auctions. Additionally, resold supply chains account for 42% of display auctions and 34% of video auctions.[1]
… Simply put, this means publishers have created a ton of paths for access to the same inventory on their site, and slightly under half of it is via resold routes.
DSPs that are expanding their businesses to own both buy and sell side components have created the perception that this access is for exclusive supply. They use this as a competitive differentiator - in a cluttered ecosystem where functionally everyone is bidding for the same inventory and there are many, many paths to that same inventory.
We think that the exclusivity claim holds little weight, especially when it pertains to display and video inventory.
All major SSPs have integrations with 80% of publishers[2] and publishers need these dynamics in place to compete with one another and, more importantly, to ensure they have high fill rates. So, it’s not in a publisher’s best interest to generate a single supply path, as it means either their inventory will go unsold, or they will make less money for it by reducing the available auctions. With these DSP to publisher deals in place, publishers are rarely limiting their inventory to a single auction. They would have to be able to monetize the 23.6 (+ 11.6 resold) paths through one single SSP or DSP if they were to allow exclusivity. Only the behemoths like Google would be able to guarantee this type of demand. So, while one player (such as the SSP) may be cut out of the deal when a DSP strikes up a direct connection with a publisher, the publisher is still likely creating multiple other duplicate auctions by partnering with other SSPs.
“Myth #2: Direct publisher integrations guarantee cost savings for the buyer”
In addition to the exclusive supply notion, there is the perceived benefit of cost savings for the buyer when DSPs have direct publisher access. If a DSP is making a publisher’s inventory directly available to the buyer without the SSP’s involvement, they can tout that they are passing on a lower bid and win price to the end buyer.
This is nearly impossible to validate.
By creating direct to publisher connections are DSPs truly cutting out SSP take rates or are they taking a portion of that and adding it to their own profit margin? And furthermore, are the publishers who have agreed to these direct connections in turn increasing the floor prices for their inventory via the direct connections in an attempt to counterbalance the reduction in demand?
Without a comprehensive comparison across a set of publishers, across both DSPs as well as SSPs, it would be hard to determine.
… So, the jury is out on this one, but without substantial cost transparency, this point is largely unproven.
Unlike the speculative benefits of direct to publisher integrations, the advantages of a robust, multi-pronged inventory strategy focused on quality, machine learning and supply path optimization are consistently proven through media performance, efficiency and cost savings to the buyer.
With that, what are the other avenues to premium, direct supply and cost savings for the customer?
At AdTheorent, we think the same if not better outcomes can be achieved via a rigorous focus on supply quality, a dedicated SPO strategy, and machine learning-based solutions. Put simply, our emphasis is on clean programmatic supply and finding direct paths to publishers and eliminating sites and non-value adding resellers that are creating the largest amount of cost bloat, allowing our machine learning models to efficiently deliver measurable advertiser value.
On the quality supply front, AdTheorent runs all of our inventory on a hand-vetted platform-wide approved list. This ensures that everything across our platform is running in a brand-safe, risk-free environment to maximize media investment. Most DSPs do not have a platform-wide inclusion list and only rely on the inclusion lists of clients or block lists. According to Digiday, the average campaign runs across 44,000 websites and the most effective means of reducing such bloat requires media teams to operate “inclusion” lists as opposed to focusing on “exclusion” lists[3].
We’ve taken the grunt work out of inclusion list management for our customers and within our platform-wide approved list, we exclude harassment and hate speech, adult content, promotion of drugs or illegal criminal activity, extreme graphics / explicit violence, firearms or weapons, dating sites/apps promoting casual sex, file sharing, torrent or hacking apps/sites, hidden and stacked ads.
We have also taken proactive measures to completely remove Made for Advertising Properties from our supply as these are largely click-bait sites that offer low ROAS. In addition to our approved list and MFA removals, we have keyword blocking in place, only buy impressions when the publisher is verified by ads.txt / app-ads.txt and have proprietary machine learning anti-fraud and viewability models over all of our inventory.
We also maximize working media and create significant cost savings for our customers via a robust supply path optimization strategy that includes working collaboratively with our valued SSP partners to implement blocks across cheap reach properties and multi-hop resold inventory across our supply. This ensures we are not paying for non-added value fees in the supply chain and that we serve in premium, above-the-fold environments. Furthermore, our machine learning models are deployed across our network and ensure that we are serving only on impressions that have the highest likelihood of conversion at the optimal price.
We think with strong quality controls, a thoughtful approach to supply path optimization, and tools rooted in machine learning, the value of direct publisher connections is overstated. It’s also important to note that a DSP touting direct to publisher connections isn’t necessarily turning off multi-hop resold routes, so a customer’s campaigns on these DSPs could still be buying resold auctions. I challenge customers to really question the places they are buying their media and ask if these quality measures are in place across their partner mix. If they are not, there are likely dollars going to waste and the media could be running in more effective places. AdTheorent’s holistic approach to inventory and direct paths across our supply provides a seamless approach for customers seeking high-quality, cost-efficient media.
[1] Jounce Media, “Seller Sentiment”, December 2023
[2] Jounce Media, “State of the Open Internet”
[3] “The Rundown: How brands can cut programmatic wastage”, Digiday, 12/5/23