What is SPO? And Why is it Important?

Optimization is a critical goal in digital advertising. Companies, such as Paragon Digital, want to spend our clients’ advertising budget as efficiently as possible, which is why we are rather obsessed with supply chain optimization or SPO. 

But what is SPO exactly? Why is it a thing? And what benefits does it provide to Paragon Digital clients? These are all great questions that deserve thoughtful answers.

SPO is all about finding the most direct path between the publisher and the advertiser. Fewer middlemen means fewer problems — and fees — paid in acquiring impressions for your campaign. Let’s say you want your ad to be seen by people on general news sites on the West Coast of the United States. 

There are myriad sellers who can provide programmatic access to relevant impressions, including hundreds of ad networks and dozens of open exchanges. However, not all of those ad networks or exchanges have direct connections to those publishers; they must purchase them from one of their partners. 

Naturally, they’ll take a bit of your budget for their efforts. The result? More of your budget will go towards a “tech tax” and you’ll have less money to spend acquiring impressions that are seen by real consumers. On top of that, you won’t have as much transparency into where your ads appear. How do you really know that they were on the premium general news sites you wanted?

SPO seeks to lower costs and provide better transparency by eliminating the complexity. It can require multiple teams of data scientists who analyze channels, and calculate infrastructure, operational, and traffic acquisition costs to determine an ideal supply chain for your campaign.

Why is Acquiring Inventory So Complex?

Programmatic advertising offers significant flexibility and opportunities for both buyers and sellers of ad space. However, it also introduces complexity to the transaction process.

Programmatic buying allows advertisers to target specific demographics, interests, and behaviors, increasing the potential effectiveness of their campaigns. It can also lead to lower prices paid for acquiring inventory that targets their ideal audiences.

For publishers, programmatic platforms provide access to a vast pool of potential buyers, maximizing their chances of selling ad inventory at competitive prices. Header bidding is an example of this flexibility. Instead of selling ad impressions directly at a fixed price, publishers can use header bidding to automatically initiate an auction for each impression to multiple buyers (direct deals, real-time buyers, ad networks) in real-time. This allows them to choose the highest bidder for each impression, potentially increasing their revenue.

But it also creates a complex ecosystem with multiple players involved in the buying and selling process. The same impressions may be sold by multiple ad networks and ad exchanges. Supply chain optimization focuses on streamlining this process to ensure efficiency and transparency in pricing.

This led to a call for supply chain optimization — aka SPO. 

What do we look for in SPO? 

To understand how SPO drives efficiency, we need to first understand who the players are that may be involved in programmatic transactions. They include:

To optimize the supply path industry players tend to focus on several factors, including:

• Latency. It’s important to minimize the time it takes for ad requests to travel between different players in the programmatic supply chain. There’s no sense in identifying the perfect inventory if it takes so long to place a bid that you lose the impressions.
• Path Verification. Routing impressions through unnecessary middlemen or intermediaries can inflate the cost with extra tech tax.
• Transparency. We want to obtain clear and reliable information about the path an ad impression takes, who is involved, and the associated fees for each step.
  
• Yield Optimization. This is a key concern for publishers, who are keen to maximize revenue by ensuring they receive the highest possible price for their ad inventory.
• Unique inventory. This focuses on sellers within an SSP, ad exchange, or ad network and whether or not they offer truly unique inventory, or the same options as everyone else. 

SPO is a continuous process. The industry is too fluid for anyone’s SPO tactics to remain static: New publishers enter the market, companies merge or go out of business, consumer behaviors change, focus moves to new channels, and new industry standards are adopted. 

Benefits of SPO

• Avoids bid duplication
• Saves inventory costs by optimizing spending
• Clearer visibility on spends
• Minimizes spending on fake sites (aka domain spoofing)

Benefits of SPO for buyers

• Brand safety
• Increased opportunities for spending

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