Disputing the ‘Dumb Pipes’ Theory: The Evolution of Supply-Side Platforms

Understanding the SSP Landscape

SSPs have had a tumultuous journey through the digital advertising ecosystem. They have had to adapt to the rise of header bidding around 2014, which leveled the playing field in terms of access to supply. This evolution forced SSPs to lower their fees to stay competitive. Transparency solutions like Ads.txt and Sellers.json were introduced to simplify the process of publishers severing ties with resellers.

By 2022, Demand-side platforms (DSPs) were encroaching on SSP territory. The launch of The TradeDesk’s OpenPath, a direct-to-publisher product developed to counter Google’s Open Bidding, was perceived as a potential threat to SSP existence.

The Turbulence Within

The turmoil within the SSP industry was further exacerbated when EMX filed for bankruptcy in early 2023. Yahoo! also shut down its SSP, laying off 1,600 people from its ad tech division. This was followed by TripleLift laying off 100 employees and Magnite reducing its workforce by 6%.

Around this time, AdExchanger released a podcast titled “The SSP Extinction Event,” indicating the perceived threat to the SSP industry’s existence. However, SSPs have not been idle bystanders in this narrative.

The Push for Innovation

Contrary to the prevailing narrative that SSPs are undifferentiated and easily disintermediated, Magnite and PubMatic launched their direct-to-buyer products in 2023. Magnite’s ClearLine and PubMatic’s Activate offer advertisers direct access to CTV and online video inventory, demonstrating that SSPs are adapting to changing market dynamics.

The transformation of SSPs isn’t just a desperate attempt to stay relevant. It’s a response to the shifting landscape of programmatic advertising. With signal loss, the rise of CTV, supply-path optimization, and sustainability initiatives reshaping the ad tech ecosystem, the roles of buy-side and sell-side tech have begun to blur.

The Role of SSPs in the Evolving Ad Tech Ecosystem

While DSPs are developing direct relationships with publishers, there remains a distinct difference between the expertise of an SSP and a DSP. SSPs are built around the idea of efficiency and optimizing publisher yield, a role that continues to be vital in the evolving ad tech ecosystem.

Addressing the Elephant in the Room

Despite these advancements, SSPs still face criticism for monetizing Made-for-Advertising (MFA) inventory, which diverts revenue away from legitimate publishers. This issue was highlighted in a report released by Adalytics, which found that every major SSP, except Kargo and TrustX, continues to monetize MFA inventory despite public pledges to block these sites.

The Future of SSPs

While the industry continues to grapple with these challenges, one thing is clear: SSPs are not ‘dumb pipes.’ They are evolving entities striving to adapt to changing market dynamics and stay relevant in an increasingly competitive industry. As the ad tech landscape continues to evolve, so too will the role and importance of SSPs.

Conclusion

In conclusion, the notion that SSPs are just ‘dumb pipes’ is being increasingly rebutted by industry professionals. Through innovation and strategic adaptations, SSPs are proving their value in the rapidly evolving digital advertising ecosystem. As the industry continues to evolve, SSPs are poised to play a crucial role in shaping the future of digital advertising.