SPO : Take back control of your programmatic budget

In the world of digital advertising, programmatic buying reigns supreme. However, like any royal court, it is fraught with intrigues, mysteries, and—most notably—disappearing budgets. Studies show that a significant portion of advertising expenses vanishes within the labyrinthine supply chain. This lack of transparency raises critical concerns about the effectiveness and efficiency of programmatic campaigns. In this article, we will explore these challenges and delve into Supply Path Optimization (SPO), a solution designed to help you regain control of your budget and optimize your campaigns.

The Complex World of Programmatic Advertising

Last October, the Digital Alliance's Transparency & SPO group, led by Aurélie Chaux and Hoai Nguyen of WPP Media, published a white paper on programmatic financial reconciliation.

"Although SPO is a fairly mature topic, the programmatic ecosystem remains marked by a certain complexity that sometimes borders on opacity. With this deliverable, we aimed to help buyers and advertisers shed light on the programmatic value chain by promoting financial reconciliation exercises. These exercises are intended to provide greater transparency and identify any potentially problematic loss of value."

Transparency is a cornerstone of a well-functioning market. It requires that all participants have access to clear, complete, and truthful information.

The Challenges of Transparency

Concerns about the lack of transparency in the supply chain surfaced in 2020 when ISBA (the British equivalent of the UDM) revealed that 15% of advertiser investments were unaccounted for. Three years later, Nestlé France reported a similar loss: 13% of its investments in open auctions were neither remunerated nor invoiced by the SSP to the publisher, yet they were still charged to Nestlé's budget, as explained by Julien Lamb in an interview with Minted.

Over the past seven years, the programmatic supply chain has grown increasingly complex. Publishers, who once sold inventory through a limited number of routes, now rely on a multitude of intermediaries. On average, publishers declare 438 sellers to access their inventories—a figure that has decreased by 5% since 2023 as publishers have begun severing ties with certain partners.

Transparency is essential to ensure fair practices and equitable remuneration. A lack of transparency, whether intentional or accidental, can lead to abuses or optimization errors, directly impacting publisher revenues and advertiser campaign performance.

Supply Path Optimization: Shedding Light on the Programmatic Black Box

Due to the limited adoption of transparency initiatives by DSPs, resellers, and SSPs, agencies and advertisers are turning to alternative solutions for better control over their purchases. This has led to the rise of Supply Path Optimization (SPO), an approach akin to supply chain optimization in other industries. SPO aims to provide buyers with better cost control, increased efficiency, improved quality, and enhanced traceability.

Initially tested in France by advertisers in the CPG/FMCG sector (Nestlé, P&G, J&J) and the automotive industry, SPO has proven effective in adapting purchasing strategies to changes in publishers' monetization partner connections.

At its core, SPO is about rationalizing and simplifying purchases to foster more direct and transparent relationships between advertisers and publishers. In practice, this involves prioritizing campaign distribution through the shortest, most efficient, and most transparent routes, thereby reducing operational costs.

The growing adoption of SPO is undoubtedly linked to its numerous benefits:

• Cost efficiency: Reduced intermediary fees lead to optimized costs.

• Competitive bidding: Improved competitiveness against other advertisers with equivalent bids.

• Transparency: Near-perfect data reconciliation rates.

• Carbon footprint reduction: Fewer servers involved in impression purchases minimize emissions.

Implementing an SPO strategy is a logical step for advertisers and buyers seeking to regain control over campaign delivery and address flaws in the supply chain.

"Through this first deliverable, we aimed to introduce advertisers and buyers to the workings of the programmatic supply chain, helping them understand the roles and value of its actors. More importantly, we sought to encourage them to conduct audits, which represent the first critical step in a Supply Path Optimization strategy." 

SPO: Efficiency, Transparency, and Control

The complexity of the programmatic supply chain is no secret. While budgets disappear within this maze of intermediaries, it's time to take action. SPO serves as a compass in this digital landscape, enabling you to regain control, optimize costs, and ensure transparency in your programmatic campaigns. By adopting SPO strategies, you can track your spending and maximize the impact of your ads.

To learn more about how SPO can optimize your advertising budget, download the Digital Alliance white paper, The Financial Reconciliation Exercise: A Guide to Understanding the Programmatic Chain.