When Supply-Side Platforms Lose Their Way

jayfriedmannewData-Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.

Today’s column is written by Jay Friedman, chief operating officer at Goodway Group.

When someone says Hershey, you probably think of chocolate. Or when you hear Louis Vuitton, you may envision brown-and-gold monogrammed handbags.

But when a digital marketer mentions the name of a supply-side platform (SSP), publisher yield management may not automatically come to mind. That's because SSPs are increasingly becoming demand-side platforms (DSPs), making it hard to know which hat an SSP is wearing.

Not all SSPs have lost their way. Some still represent the sell side by driving and improving yield. Others, including Google and Microsoft, were always built to be holistic systems. Yet others act like Mrs. Doubtfire, originally meaning well but ultimately hurting those around them by leading a double life.

Businesses fail all the time, so why should we care if there are SSPs representing both the buy side and the sell sides? Why care if SSPs are pursuing revenue growth in areas that most buyers and sellers don’t know about?

We should care because a few bad actors’ misguided attempts at revenue growth may exacerbate our industry’s challenges by creating more confusion, less transparency and more barriers to efficient programmatic media.

Double-Dipping

SSPs launched with a simple premise: helping publishers increase the yield of unsold inventory significantly enough that they make more net money despite the SSP fee than without the SSP at all. Times have changed. It’s not about optimizing unsold inventory anymore; it’s about optimizing the entire supply, including sponsorships, direct sold and unsold. How many publishers would give their SSP an A+ in this area?

Additionally, there are several revenue streams to monetize, egos to tame and personalities to cajole, not to mention data leakage prevention. A good SSP will help a publisher with all of this and earn every penny of its fee.

But then there’s the reality. When companies want to be bought or become publicly traded, they have a need to show constant growth. Growth typically comes from new service offerings for an existing client base or through cannibalizing the competition. Every SSP has significant room for growth in both of these areas.

TV, radio and digital out-of-home are all moving online, representing huge growth possibilities, often within existing clients. There are way too many SSPs, so why shouldn’t the good ones just steal the bad one’s lunch money?

Unfortunately, some SSPs must think both of these opportunities are too hard and would rather hop the fence to double-dip by becoming a DSP and taking fees from both the buy and the sell sides. Oh, and get this: Some SSPs have decided to charge everyone double by forcing clients who don’t use their DSP to pay a buy-side fee charged on the back end to the DSP that they do use, without their knowledge. The few sure know how to ruin it for the many.

I wish it stopped there. With public companies in the managed service space reporting 40% to 60% margins, some SSPs are now targeting this range rather than being happy with “only” their sell-side fees and secretly imposed buy-side fees. I know this because I personally spoke with an SSP vendor who attempted to facilitate a private marketplace deal at well over 100% of the price offered by the publisher directly.

A Matter Of Perception

If we look at pricing transparency through a behavioral economics lens, there are two distinct responses to that transparency or lack thereof. If I pay $.59 for a can of green beans at the grocery store, and only $.06 goes to the farmer, I don’t think twice because that $.59 is still a bargain for me. I’m fine with the opacity because I can shop around and count on competition.

On the other hand, if a realtor listed a $300,000 home for $500,000 – all the while promising transparency but keeping $175,000 for him or herself, homeowners would be outraged. It’s not the margin we pay (green beans were 90%) nor transparency versus opacity. It’s the perception of value and the expectation we have when entering the transaction compared to the outcome. We know SSPs are making publisher fees and are OK with that. I don’t believe we’re OK with undisclosed double dips.

This isn’t to say buyers are completely off the hook. Advertisers should talk to people and figure out who is straight with them. They should also talk to their programmatic partners – they know plenty. They shouldn’t reward the bad guys with spend.

On the publisher side, though, it’s important to know what SSPs are doing on the buy side. This is alarming enough to me and, I believe, detrimental enough to the growth of the industry that I feel it’s important for buyers and sellers to start this conversation more openly.

Follow Jay Friedman (@jaymfriedman) and AdExchanger (@adexchanger) on Twitter.

1 Comment

  1. Very well penned article Jay !!
    Although, still there are a couple of companies who are trying to focus on the publisher monetization and providing world class services to the publishers with transparent yield management on one hand and good bucket of demand on the other which eventually leads into better monetization of the overall inventory. As, these companies are not only helping the publisher with their remanent inventory but also with their PMP sales and private advertiser/DSP auctions as well for their first look inventory.
    Hope for the best on the publisher side in the last quarter of 2016.

    Reply

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