The Trade Desk’s supply-path optimization efforts portend potential disruption ahead

Google mouse

The countdown to cookie-deletion on the internet’s most popular platform — Google’s consumer offerings and accompanying ad stack — continues meaning others on the market will have to ready themselves.

As the second quarter of 2022 kicks off, some predict the internet (as an advertising medium) is bifurcating into known, or “authenticated”, and unknown realms with the former typically characterized by walled gardens.

Walled gardens, typically prefer their own technologies and limit third-party participation meaning publishers and independent ad tech players have their work cut out for them over the next 18-months if they are to maintain relevance for advertisers.

As a response, independent players want to authenticate the (otherwise unknown) web with their proliferation of identity solutions — The Trade Desk’s Universal ID 2.0, arguably, the most high-profile example.

In recent weeks, the demand-side platform announced a series of partnerships including a tie-up with LiveRamp’s Authenticated Traffic Solution to better ensure that Universal ID 2.0 complies with EU privacy laws, as it attempts to buttress its position post-2023.

The ability to work more closely with publishers has been made much easier as a result of header bidding
Will Doherty, vp inventory development, The Trade Desk

The Trade Desk also penned a partnership with Adobe to bolster the addressable base of UID 2.0 — an identifier that synchs with partners’ first-party data to improve ad targeting by synching with the email addresses that can be accessed via the software giant’s customer data platform.

A ‘complicated’ relationship

Elsewhere, The Trade Desk recently unveiled OpenPath, a supply-path optimization effort whereby the DSP offers advertisers direct access to premium ad inventory with publishers including Condé Nast, Gannett, Hearst and Reuters among those on board at launch.

Among other aspects of the SPO crackdown, the DSP will eschew Google’s Open Bidding — an aspect of Google’s ad stack that comes in for criticism in the ongoing Texas AG-led antitrust case — a move it likewise asks supply-side platforms to mirror.

In a recent public discussion, The Trade Desk CEO Jeff Green said his company, along with the entire ad industry has a “complicated relationship” with Google with his comments indicating that, if true, the allegations made by the Texas AG signal problems ahead. “Google [allegedly] creating a partnership with Facebook,” he added, “to then guarantee it a certain amount of market share by offering them lower prices than what they would to anybody else … you could see how that can be seen as anti-competitive.”

A surprise disruption

OpenPath caused some degree of fluster with media agencies (the primary client-constituency of The Trade Desk) and supply-side platforms (a tier of the industry that is arguably most at risk of such direct integrations) taken surprise by the public announcement.

For instance, some asked questions over how The Trade Desk intends to provide assurances to both the buy- and sell-side of the market, after all, isn’t Google’s attempts to collect revenues from all tiers of the market at the core of its criticism?

Meanwhile, publishers are faced with the quandary over how best to juggle demand; is it best to maintain longstanding relationships with SSPs, or go more directly with the industry’s largest independent DSP?

Will Doherty, vp of inventory management at The Trade Desk, moved to assure such concerns adding that OpenPath poses an additional choice for both buyers and sellers alike. “The only thing we’ve done here is, with publishers that we think are strategically important and in line with our overall investment strategy, is created an additional option and remove one link from the chain,” he said.

Publisher’s dilemma?

Separate sources indicated to Digiday that direct integrations with DSPs such as The Trade Desk are a more realistic option for scaled, technically sophisticated publishers. Meanwhile, long-tail publishers, with fewer resources, are better serviced by traditional SSPs.

“We don’t bid differently into OpenPath than we would through an SSP, the real question for a publisher to have to answer is [whether] there is a benefit to receive a bid directly from The Trade Desk or through an SSP partnership,” added Doherty. “We are not in the publisher business, it’s just the ability to work more closely with publishers has been made much easier as a result of advancements of header bidding.”

OpenPath publishers will pay The Trade Desk an integration fee that will go towards infrastructure costs – a fee that is not intended to act as an additional revenue stream. Doherty detailed how this will cover services such as bidstream-management, etc. with the intricacies involved in such a set-up (for both buyer and seller alike) all made clear in its contractual terms.

Although, separate SSP sources noted that compression of the supply chain is likely to bring downward pressure on publishers’ margins. For instance, publishers and SSPs that want to facilitate Google’s Open Bidding will have to pay for separate integrations.

Sell-side sources, all of whom requested anonymity due to their reliance on The Trade Desk demand, told Digiday the DSP’s public statements were “confusing”, especially when juxtaposed to the (effective) bypassing of sell-side ad tech for select publishers.

“The Trade Desk is not concerned with maximizing yield for publishers and I think that can create some issues down the line,” added one source. “If you’re bypassing an auction, a buyer will always go for the lower price. So, it seems to me it’s going to put some downward pressure on publishers over time … rather than what an auction does which is to create what I’d call a fair price.”

In an emailed statement, sent separately to Digiday, Jeff Hirsch, chief commercial officer at PubMatic, commented that SSPs help publishers without the technical sophistication for direct integrations do the opposite; maximize yield.

“The rise of header bidding has shown that increased competition leads to higher CPMs for publishers,” read the statement. “As bid density drops, publishers should reconsider their flooring strategies to ensure they receive fair market value for their inventory.”

A case of counter-disintermediation?

A duplicative supply chain can result in a scenario whereby buy-side players are operating blind. For instance, publisher inventory represented by more than one SSP can often result in DSPs bidding twice in the same auction, thus needlessly driving up their costs. So, in theory, OpenPath benefits all buy-side players.

However, some questioned whether or not OpenPath was an effort from The Trade Desk to offset the SPO initiatives of holding companies in recent years — activities that have primarily involved them cozying up to SSPs? This is a trend that, some believe, has served to disintermediate DSPs.  

Multiple sources told Digiday that DSPs are largely irritated by agency holding groups striking partnerships with SSPs as it effectively shifts control over where advertisers’ budgets are invested from DSPs to SSPs. “It basically means that the holding group now cares about transacting through a specific SSP,” explained one source who declined to be named given their relationships with both DSPs and SSPs.

The Trade Desk’s Doherty told Digiday that OpenPath “is something that many of our buyers [primarily media agencies] have been pushing us to do for a while” given the growing complexity of the programmatic supply chain.

“For us, the reason we’re doing this is less to do with fees and everything to do with how much better and stronger our bids perform when we give it directly to the publisher,” said Doherty, adding that holding group’s SPO efforts and their own can co-exist.

Andrew Goode, evp and managing director, investment at Havas Media Group, told Digiday how the SPO-landscape is still evolving and that other DSPs are likely to be paying attention to OpenPath with a view to potentially emulating it.

“There is a potential ground-shift happening where agency and SSP relationships may somewhat disintermediate the role of the DSP for supply selection,” he wrote in an emailed statement adding that offering clients full visibility on where they invest is key.

“OpenPath providing an opportunity to bypass the SSP auction is a smart move, and will potentially place SSPs under competitive pressure if they provide a lower fee structure for publishers, and bring financial transparency to the process,” concluded Goode.

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