Search site

Become an AOP member

More details

Pubmatic banner M Preview

The De-commoditisation of the SSP and 'Tech Tax'

Published: 22 Oct 2020

A decade ago, when programmatic was in its infancy, publishers used supply-side platforms (SSPs) as an efficient way to sell remnant inventory while continuing to sell the majority of inventory through direct deals. Publishers and brands soon realised the benefits of programmatic warranted increased investment and today, the majority of digital advertising is traded programmatically. As brands and agencies ramped up programmatic ad spend the inner workings of the supply chain came under scrutiny and concerns were raised over the lack of transparency into the value of each link in the chain. 

Out of this lack of transparency supply path optimisation (SPO) was born, with a desire to identify and understand the waterfall of the so called ‘tech tax’ that stood between marketing spend and publisher revenue. Today, leading SSPs offer transparency as a standard practice. 

The next logical step is for SSPs to provide insight into and understanding of all of the costs involved in building and supporting a supply chain that requires significant technical infrastructure as well as human resources. Until brands and publishers achieve the desired transparency in order to better understand the value that the programmatic ecosystem brings, all fees, regardless of how low or high they are, will be considered a ‘tax’.  

What is the secret of a good SSP? 

It’s hard to be an ad tech vendor for publishers in a market where the competition (such as Google, Facebook, and Amazon) are able to direct demand back to their own stacks, creating an unfair advantage. These behemoths can afford to charge nominal fees for their solutions because they don’t need to make money through tech as they take massive profits from media and e-commerce. 

For many years now, publishers have been asking to work with SSPs that provide a single independent solution that is able to efficiently sell all their inventory. For an SSP this means investing revenue into tech development to support and enrich the competitive business economics and support publishers’ rights to independent tech selection. Good SSPs invest in developing tools that put publishers in control of managing their inventory and demand in yield-positive ways across all selling methods, including price flooring, buyer rules, and innovative ways to package inventory within a PMP across all ad formats. 

When publishers work with independent SSPs that can support all revenue streams, not just those under their direct control, they improve efficiency and effectiveness across all channels (display, video, CTV etc.). Independent SSPs are also able to offer media buyers more transparency than Google, which largely operates as a black box, something that buyers are actively trying to move away from. 

Leading SSPs also build for the future creating solutions for the upcoming cookieless world and are already investing in solutions that will solve for the potential changes to device IDs by Apple. By building ahead of the curve, innovative SSPs provide publishers and buyers with the ability to test and learn before change happens - ensuring they are set up for success when the time comes.  

2021 and beyond 

The debate over an appropriate and fair fee structure (often referred to as an SSP’s ‘take rate’) is a healthy one to have. However, in order to move forward and find a positive solution we need to decide who is qualified to lead this debate. We need people who understand both the technology required and the appropriate level of cost to provide these solutions. We then need to work together as an industry to disseminate this knowledge and overcome the current lack of education. 

Brands and agencies are doubling down on their efforts to consolidate spend across their preferred supply partners, which will further limit the number of tech providers that can effectively do business profitably. With consolidation we will see publisher revenue increase with higher ad spends, lower operational costs, more financial transparency, and improved efficiency as the number of partners they need to manage is reduced. With fewer players we will also see higher levels of service and an increased ability to collaborate to design product roadmaps that meet the needs of brands, publishers, and tech companies. 

Collectively, our goal for 2021 needs to be understanding the real costs of doing business and establishing cross-industry reference points that illustrate the reality of doing business. While this isn’t necessarily going to provide full clarity into ‘tech taxes’, it will enable advertisers and publishers to weed out weak SSPs based on a demonstrable understanding of value. This will enable good SSPs to maximise publisher fill rates, eCPMs, and campaign performance in the most effective way creating a far more valuable ecosystem and an understanding that value needs to be paid for.

Categories:  Member News