ADOTAS Jun 17, 2014 by Roi Chobadi – If you haven’t noticed it, a quiet but fierce battle is currently being fought in the mobile ad display space between two supply providing business models: supply side platforms (SSPs) versus ad networks. There’s so much tension between these two types of mobile ad companies, each is even trying to morph into the other, just to gain an edge. While ad networks currently dominate this battlefield, major publishers like Pandora, Wall Street Street Journal and ESPN will cast the most important vote.
Ad Networks Vs. Supply Side Platforms
Let’s review the strengths and weaknesses of the ad networks versus SSPs across their two main offerings — inventory and technology from the perspective of their customers: the advertisers (brands, trading desks, agencies).
• Inventory: Ad networks currently have a hold on exclusive and premium publishers, and access to the top publishers that most big brand advertisers covet. In contrast, SSPs have real-time bidding (RTB) inventory – generally considered remnant, fraudulent, low-quality, not-brand safe. Winner: Ad Networks.
• Technology: As SSPs are supply providers and enablers of procurement rather than direct agents of the buyers, we would consider the SSP + demand side platform (DSP) combination as competing with the ad network model. With regards to targeting and optimization, ad networks lack advanced technology to programmatically optimize or target specific audiences sophisticatedly; instead, media buyers must manually make campaign changes. By comparison, SSPs use programmatic technologies to optimize on behalf of publishers, while DSPs optimize on behalf of the brands as well as allow the brands to sophisticatedly target specific audiences; The SSP + DSP duo relies on machine-learning capabilities to optimize campaigns without media buyers’ involvement. Winner: SSPs (with DSPs).
Since each side holds a competitive advantage in either category, they are now furiously attempting to co-opt the other.
Morphing Into Each Other
Ad networks are adding real time-bidding (or RTB) integrations, which extends their supply significantly into the long tail. Many also add programmatic engines to optimize the procured RTB supply and even their own direct publishers supply; they’re also connecting their own remnant supply to DSPs thus increasing fill rates for their publishers portfolio. In this way, ad networks are attempting to become de facto SSPs.
At the same time, SSPs are attempting to become ad networks, taking a subset of their supply that they manually identify as “premium,” high-quality, and brand safe — and then, just as an ad network would do, selling that directly to advertisers in bulk, using the concept of Deal-ID (private marketplaces). A leading SSP doing that now is Rubicon Project, but others are following as well.
Barriers to Success
The SSPs and Ad Network are fighting for two things: 1) publishers; and 2) advertising dollars.
Historically, premium publishers have preferred ad networks. However, could SSPs manage to “steal” the premium publishers from the hands of ad networks?
It’s possible, but there are two more barriers for SSPs to attract premium publishers.
1. Guaranteed Fill-Rates and Exclusivity Contracts: Currently, ad networks guarantee a certain fill rate (minimum impressions / revenue) for their premium publishers; and, many times, ad networks demand exclusivity in return, at least on part of their inventory, if not all. Publishers would then have a difficult time switching to SSPs (due to the exclusivity lock-in) and also have very little incentive to do so as the ad networks offer them higher fill rates than SSPs because they do not know yet which impressions DSPs would bid on and how much.
If ad networks continue to play it right, they may keep the upper hand in spite of the progression of RTB and the SSP + DSP model.
However, there are some barriers facing ad networks as well.
2. Limited Global Fill Rates: Ad networks are usually local players, each covering a specific geography. As such, they often have limited available cash and limited ability to guarantee global fill rates.
In contrast, some SSPs are global and very strong financially – they can afford offering very high fill rates to premium publishers, even in new geographies. For example, this is something MoPub does very well.
Can SSPs manage to convince ad buyers to buy premium supply from them?
Maybe. Ad buyers (brands or agencies) traditionally buy premium supply from ad networks. The notion of buying premium (brand-safe) supply on RTB is very nascent, but looks promising. The invention of private marketplaces and Deal IDs allows the SSPs to sell specific quality supply directly to specific advertisers at a predetermined price. What’s the advantage here? This guarantees quality to both sides, for a fair price. Deals may also give publishers the minimum fill rate they are looking for because the deal can also guarantee quantity.
Here, two further challenges stand in SSPs way to success: 1) in spite of the private marketplaces, many brands are still skeptical about buying premium inventory via RTB; and 2) many of the buyers have long-term relationships with the ad networks. But some of these relationships are not perfect, and some ad buyers may be ready to try the more transparent model of SSP + DSP.
The Ad Tech War Will Be Decided by Premium Publishers
It’s too early now to say which side will win. However, it’s clear that each feels threatened and sees an opportunity to own the entire spectrum of supply, from long tail remnant inventory to premium publishers. That’s why both are diving head first into the other’s business. And if a superior service does surface, premium publishers will anoint the victor and the war will end.