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An Introduction to Supply Path Optimization
An Introduction to Supply Path Optimization

Get started with some SPO essentials

Tomás Yacachury avatar
Written by Tomás Yacachury
Updated over a week ago

Last Updated: November, 2023

What is Supply Path Optimization?

Supply Path Optimization (SPO from now onwards) is usually defined as a strategy aimed towards simplifying the supply chain between publishers and advertisers, by removing unnecessary intermediaries and reducing redundancies.

While these tactics are certainly tied to SPO, as a definition it falls short as to what SPO can achieve.

We define SPO as having a differentiated strategy on each supply path, based on a deep understanding of the characteristics of such a path.

Why is SPO relevant today?

A few years ago, in-app bidding was introduced into the app monetization landscape, and over the course of the years has slowly been taking over the traditional waterfall setups. 

Ad Exchanges that are in-app bidding enabled have guaranteed full access to all impression opportunities on the publisher's app, contrasting the legacy waterfall setup where their reach was limited to their position on the waterfall. As such, in-app bidding has democratized access to in-app supply.

But with the reach issue resolved, DSPs like Kayzen face a new challenge. Redundancy. With the increased adoption of in-app bidding, DSPs can receive multiple bid requests for the exact same impression opportunity, across multiple exchanges.

With advertisers now having increased exposure to multiple supply paths to reach the same impression opportunity, the question of which supply path is best for them is more important than ever.

What can SPO help me achieve?

Different demand verticals can have different views on what an optimal supply path means. Branding advertisers may be more interested in buying on the cheapest supply path to maximize their media budget reach, while performance advertisers may be more concerned on how their creative is rendering on the different SDKs to secure an optimal, compelling creative experience that drives performance.

Make sure to identify what your use case is trying to achieve and which of the following supply path characteristics matter the most to you.

Supply Path Characteristics

Upon defining SPO, we established a condition on having a deep understanding of the characteristics a supply path has, but what are these characteristics? What are the variables that make a supply path different from others?

  • Waterfall vs In-App Bidding

    Depending on the mediation platform leveraged by publishers, networks / exchanges can either be on a waterfall structure, or have in-app bidding capabilities (also known as header bidding, parallel bidding)

    • Waterfall: gets called sequentially based on historical CPMs. As such, the exchange's exposure to impression opportunities available on the app is subject to their position on the waterfall

    • In-App Bidding: gets called in parallel for a real time response. As such, the exchange is exposed to all impression opportunities for the app in question.

    In general, it is desirable to prioritize exchanges with in-app bidding capabilities as it will guarantee full access to all impression opportunities within an app. If you want to learn more about which networks / exchanges are in-app bidding enabled on each mediation, please refer to the following article.

  • Fee Structure

    Networks/Exchanges usually have fees associated with utilizing their supply path. These can either be supply side or demand side fees. While in most cases networks/exchanges claim to have removed demand side fees, the truth is that DSPs such as Kayzen have little to no visibility on what the actual fees being charged, whether supply or demand side.

    In terms of SPO, understanding what the fee model is, and the margins associated with each supply path can help, not only determine how much noise is introduced in the auction dynamics, but also maximize your media budget purchasing power.

    Follow up with this article to learn more about supply side fees.

  • Supply Chain Length

    Exchanges usually source their traffic directly from publishers, either through a direct SDK integration or S2S connection.

    In some cases, exchanges make their inventory accessible not only to DSPs, but also other SSPs. Supply paths that have more than a single intermediary (exchange) are considered indirect supply paths.

    When developing an SPO strategy, it is important to prioritize direct supply paths, as indirect paths, by having more than one intermediary, will result in a concatenation of fees, hence significantly decreasing your working media purchasing power.

  • SDK Rendering Capabilities

    The creative experience provided to the user is not only determined by your creative, but also by the SDK that delivers such creative, i.e. the experience provided by a creative rendered on the AppLovin SDK can differ significantly from the same creative on the Fyber or Unity SDK.

    Close buttons, Progress Bars, Sound on/off, clickable surfaces. These are some of the variants that SDKs have and can have a significant impact on the performance of your creative.

    Moreover, over the past year, certain exchanges have added support for native iOS creative experiences, such as SKOverlay, or different variations on how and when to trigger StoreKit.

    A successful SPO strategy should not dismiss the impact that SDKs have on the overall creative experience. There could be cases that, while fees are larger, the SDK provides a much more impactful experience, thus driving performance significantly higher.

    If you want to learn more about creative rendering experiences, make sure to visit the Creative Rendering Experiences section.

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