In an ideal world, every bid impression would travel the most direct route between publisher and advertiser. However, the crowded space and resulting supply chain complexity means this is often not the reality. Multiple intermediaries lead to an excess of supply chain hops, with each having a negative impact on the efficiency and transparency of media trading – while not necessarily adding value.
Before addressing the issue, let's take a step back to get a clear understanding of what we mean by supply chain hops and why they happen.
Essentially, a hop refers to each intermediary that an ad impression passes through on its way from the publisher to the advertiser. Typically, these will be entities involved in the transaction, such as supply-side platforms (SSPs), demand-side platforms (DSPs), ad exchanges, data management platforms (DMPs), resellers, wrappers, and so on.
It’s not hard to see that the more hops an impression has to make, the longer and more complex the supply chain. This puts pressure on operational efficiency and transparency – and flies in the face of the efficacy promised by programmatic advertising.
As the number of intermediaries continues to grow, so too does the number of hops in any given supply chain - which has repercussions on operational costs, transparency, sustainability and returns on investment.
Three factors are widely cited for this kind of ‘hop inflation’.
Header bidding is, once again, a culprit. As detailed previously, it helps publishers increase yield by enabling them to distribute the same impression simultaneously to multiple SSPs, meaning a DSP can see this one impression multiple times and buyers can bid on it multiple times. As a consequence, the bidstream overflows with duplicate bids and auctions - and more auctions means more hops.
Reselling sees publishers pass inventory between multiple intermediaries and wrappers, as they aim to reach more buyers. Each of these extra players adds more routes between seller and buyer – without necessarily increasing value – upping the hop count and reducing transparency.
The final offender is blanket bid broadcasting, thanks to SSPs sending every connected DSP all available bid requests, whether or not they’re relevant. This non-targeted bid blasting adds more traffic to the bidstream which, as well as being low value, increases supply chain hops.
Having established the reasons behind a build-up of excessive supply chain hops, the next step is to be clear on why this issue matters.
As you’d expect, there are several implications:
The first step to tackling hop inflation starts with having full visibility of what is happening in the supply chain.
Here, the IAB Tech Lab lends a strong helping hand. Its OpenRTB SupplyChain (schain) object specification aims to improve transparency, trust, and SPO in programmatic advertising. It details every entity that touches a bid as it moves through the supply path, with each platform participating in the sale of that impression shown as a node (i.e. hop). The total number of nodes shows the full length and complexity of the supply path.
Combining schain logs with the IAB Tech Lab's ads.txt (which lists authorized supply chain sellers) and sellers.json (which shows the identities of these intermediaries) maps out how impressions flow from publisher to buyer, thereby identifying where excessive hops take place.
Technology is one part of the equation. On the buy side it can – and should – be supplemented with internal policies such as hop-count guardrails that specify the maximum number of hops allowed in a supply chain, with those that exceed this threshold blocked. Guardrails can be combined with whitelists – exempting, for example, direct publishers or first-party inventory sources verified by ads.txt and sellers.json, verified intermediaries known to add value, high-performing supply partners, private marketplaces or programmatic guaranteed deals where supply paths are transparent, etc.
On the supply side, reseller audits are critical. Scrutinizing the value that each supply chain participant adds enables publishers to simplify their supply paths by cutting out unnecessary layers. Other options are direct deals with high-performing partners and using curated marketplaces to bypass redundant paths and reduce the overall hop count. The aim is to streamline traffic without compromising access to quality inventory.
Traffic shaping, covered in previous blogs, is another core tactic to reduce hop counts. Its focus on removing duplicate bid requests to fine-tune the bidstream so that buyers only see the inventory that is most valuable to them improves efficiency because unnecessary and low-value intermediaries are removed – a key element of SPO.
Ultimately, the tactics above need to be underpinned by industry co-ordination, the value of which can’t be underestimated. The wider the consensus that the issue of overly long and complex supply chains needs to be addressed, the easier it is for more organizations to align on the transparency standards and auction best practices that will benefit the programmatic ecosystem.
Sitting between hundreds of buyers and sellers, BidSwitch provides analytics and reporting tools that show exactly how bid requests are routed across its connections. In highlighting excessive or suspect supply paths it provides partners with the insight needed to identify the routes that are most efficient and those that require trimming or deeper investigation. Partners can also enable BidSwitch’s traffic-filtering and deduplication technology so that bidstream volume is better aligned with actual demand.
As a central marketplace hub, BidSwitch takes a one-to-many approach: one integration connects each DSP and SSP with a network of partners, so they don’t have to build singular integrations with each partner. This consolidation reduces infrastructure load for all parties and creates a cleaner, more manageable supply path.
BidSwitch reinforces its technical capabilities with an advisory team that supports partners with best practice SPO frameworks, tailored to the goals of each DSP and SSP – an impartial approach, committed to enabling a more efficient ecosystem.
Hop inflation is an industry-wide problem that all players should take seriously, combining the technical tools that are available with best practice guidelines. Starting with an audit that shows current hop counts and identifies outliers brings clarity to the action required and aligning with partners on initiatives such as hop guardrails and traffic-shaping policies are moves that address the issue.
Working with BidSwitch introduces tools, technology and industry experience tailored to the individual SPO needs of each partner – get in touch today to reduce unnecessary hops in your supply chain.