Programmatic is a big, hairy topic for the uninitiated. Today, we’re going to cover one of the most overlooked subjects within programmatic: Supply.

The subject of “targeting data” seems to be sucking all of the oxygen out of the room because of the coming cookie apocalypse. Lost in the shadow of that conversation are the actual publishers that run the ads and the importance of managing your path to their inventory.

As a marketer, it is helpful to understand how the sell-side (the publishers) brings their inventory to the market. Let’s take a look at how the publishers get the inventory to you as a marketer in a programmatic transaction.

TL;DR - You are overpaying. Yes, you.

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Marketplaces

Before we discuss supply strategy, let’s make sure we are all on the same page when it comes to market structure and dynamics.

Let’s say that you are a small publisher of home improvement websites, including AwesomeKitchens.com. You’ve bought into all the hype and make the decision that you must sell at least some of your inventory programmatically.

Most newbie publishers will turn to Google Adsense for the task.

As a publisher, you put up the Adsense tags on your site, and set things live. From there, Google does the work of matching advertisers to your inventory. Eventually, the cash starts rolling (trickling, really) in. Mission accomplished, right?

Ehh. Not so much.

What Google has done, on your behalf, is place your site and its available impressions into the Open Marketplace.

There are generally two major types of programmatic marketplaces:

Open Marketplace: Inventory that is available to just about anyone, and sold to the highest bidder. Advertisers can use their DSP of choice to bid on impressions using the user and device attributes surfaced in the auction. In essence, they can be highly selective about the impressions they want to bid on.

Private Marketplace: Functionally the same as an Open Marketplace, only in this case, we have an “invitation only” market for buyers. Media sellers bundle up portions (or all) of their inventory and make it available to selected buyers to bid on. It sounds sophisticated, but really it is just a list of advertisers and buyers that are allowed to participate.

Some private marketplaces are set up so that there is only one buyer. For others, there may be many. For example, Awesome Ad Agency might strike a deal with a publisher to get access to the inventory at a 10% discount. The publisher sets up a Private Marketplace, governed by a “deal ID,” that admits only the Awesome Ad Agency’s bids.

There are a lot more details and nuance, but for today’s discussion, that’s all we need to for now.

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Why is this important?

Not all exchanges are created equal. Written on a chalkboard in a white, modern kitchen.

AwesomeKitchens.com wants to attract premium advertisers. It’s a good look for the site, and it should carry premium ad dollars. Unfortunately, most of the premium advertisers do not buy in the open marketplace. Why not?

The open market has a ton of quality issues and lacks rigorous governance. That does not mean buyers should avoid the open market. However, it does require a lot more attention to detail and years of experience to manage properly. Otherwise, your marketing dollars could end up supporting fake websites, ad fraud, or running in environments inappropriate for the brand.

So why is AwesomeKitchens.com not attracting bids from advertisers like Home Depot, Kohler, and Viking? Because these brands do not bid in the open market or only do so sparingly. Instead, these brands appreciate the controls afforded to them in a Private Marketplace.

How does AwesomeKitchens.com get a private deal in place? Good old fashioned salesmanship or adopt some new tech.

When a publisher reaches a large enough size, it makes sense to upgrade yield management techniques from a basic AdSense account to a proper sell-side-platform (SSP) or exchange. SSP’s and exchanges help publishers navigate the complexities of inventory yield optimization. The basic value proposition is to find the best mix of demand sources to maximize revenue. A good SSP or exchange will help a publisher like AwesomeKitchens.com get its inventory organized in a way that is attractive to buyers. Plus, they often facilitate “new” demand.

Investing in an SSP or yield optimization technology only makes sense if the publisher has grown to a size that warrants it. In other words, if a site only has a couple of million pageviews a month, it should stick with something like AdSense.

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…back to the advertiser

Why does any of this matter to you as an advertiser? The path your ad takes to get from you to the eyeballs of the consumer is limitless but often opaque.

There are literally hundreds of thousands of sites and apps available in the open marketplace, and you should only care about 1% of them. Setting aside the quality of the audience for a moment, the environment where your ad runs not only drives performance but could ultimately hurt your brand if proper precautions are not taken.

At the same time, scale becomes a challenge if you hand-select each site.

Dozens of ways to buy ads on the same site

Remember earlier when we discussed AwesomeKitchens.com selecting an exchange to sell their inventory? Well, there’s no reason they need to just pick one exchange. They can utilize many.

The exchanges then take the AwesomeKitchens.com inventory and make it available in multiple marketplaces including semi-private and private marketplaces.

TL;DR - Before long, there are a dozen different ways to buy the exact same ad placement on AwesomeKitchens.com. However, each path to that inventory comes with wildly different fees and costs.

You are overpaying

If you are a marketer and have never conducted a supply path audit of your Top 100 publishers, I promise you are overpaying. Well, but…nope. You’re overpaying.

Isn’t the agency supposed to handle all this for me? Absolutely, but are they? If you’ve never asked, there’s a good chance that they are not focused on optimizing the supply path to the extent that they should.

This does not mean the agency is being negligent. There are only so many #1 priorities any firm can focus on. However, it is absolutely worth having the conversation right away.

In my observation, most brands are not focusing their programmatic buys on the supply path that is most efficient for their top-performing publishers. With some basic management and optimization, they could save 10-20% on the take rates and fees baked into these paths, without taking a serious hit on scale and performance. It just requires time and effort.

Here’s a diagram to illustrate the basic path.

This is a simplified illustration of a brand’s DSP bidding into multiple supply paths in order to buy impressions on the same domain. Each clears at a different price.

For today, we’ve purposely kept this diagram high-level. If you’d like to nerd out on some diagrams and a lot more detail, I highly recommend downloading a copy of Jounce’s Little Black Book of SPO (free). Not a paid plug, it is just that good!

As you can see, you paid different rates based on which path was taken to get to AwesomeKitchens.com. That is because of the fees and commissions taken out of the supply path by the DSP’s, exchanges, and a number of other vendors not identified in the diagram.

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A quantitative exercise to better understand the pros and cons of concentrating the spend via Exchange “A” should be conducted. Is it the same exact inventory? On the surface, does the campaign performance look about the same? If you move all the spend over there, is there enough scale available via Exchange “A” or would we also need a splash of Exchange “B” to get us to the goal?