What Is Demand Path Optimization (DPO)?

what is demand-path optimization


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The programmatic advertising industry is not without its fair share of challenges. 

From ad fraud to a lack of transparency into the media-supply chain, both advertisers and publishers have been dealing with these challenges for many years. 

Luckily, a number of solutions have emerged to tackle these issues.

For advertisers, one way to gain more transparency into the media-supply chain is to conduct supply-path optimization (SPO).

For publishers, the equivalent is demand-path optimization (DPO). 

In this blog post, we’ll look at what DPO is, how it works, and how publishers can benefit from it.

Key Points

  • Demand-path optimization (DPO) is the process of evaluating and improving the way advertisers buy ad space from publishers.
  • There are four main steps with the DPO process: Data gathering, analysis, planning and executing.
  • The most important benefits for publishers are increasing transparency in the media-supply chain and eliminating bad actors, e.g. ad fraudsters.
  • DPO and SPO have the same goals, however, DPO is seen from the publishers’ end and SPO from the advertisers’ end.
  • The IAB created Buyer.JSON, a mechanizm for identifying buyers of advertisements to support business transformation.

What Is Demand Path Optimization (DPO)?

Demand-path optimization (DPO) is a process by which publishers analyze the path that media buyers (advertisers and ad agencies) take to purchase their inventory. With DPO, publishers seek knowledge related to the areas of the media-supply chain that are working well for them and the ones that could be optimized. The data collected from the DPO process provides publishers with valuable insights that can help them increase ad revenue, yield, reduce AdTech fees and improve the user experience on their website and apps.

The goal of demand-path optimization is to identify what value each buyer is bringing to the publisher and help advertisers to find the most optimal and effective path to their inventory.

But what does this mean in practice? 

This means that publishers analyze transaction costs, the transparency of the purchasing path, the ease of reaching the desired inventory for buyers, the overall attractiveness of the offers presented to them, and their ad revenue. Typically, after conducting DPO, publishers will consolidate the number of AdTech companies and media buyers they work with.

With DPO, each chain of the path is analyzed: Supply-side platforms (SSPs), exchanges, ad networks, trade desks, and demand-side platforms (DSPs).

Analysis is the first step in the optimization process. The remaining steps include drawing conclusions, strategy development and execution.

A sister concept to demand-path optimization is supply-path optimization (SPO). This is a process conducted by advertisers, whereby they try to optimize the path taken to buy the ad space.

Both DPO and SPO fall under the umbrella term ad path optimization (APO).

How Does Demand-Path Optimization Work?

The first step in the demand-path optimization process involves the publisher gathering data about the DSPs that are buying the inventory. This data includes win rates, clearing prices, ad quality, payment terms, bid response time, and credit rating.

During the evaluation process, publishers focus on the numbers that are important to their business and might want to answer to questions such as:

  • Who are my best buyers?
  • How many times has each buyer bid and won?
  • Which buyer pays their bills on time?
  • What is the response time of the bids?
  • Are the ads of high quality?
  • If I work with this advertiser, will they be able to pay me?

Publishers can get most of this information from their AdTech partners, e.g. supply-side platforms.

The next step is to prepare the plan for optimization.

Maintaining positive relationships with advertisers is an important part of the process. Publishers need to know everything about their buyers’ needs, and have a clear view on preferred prices, desired advertising space, inventory amounts, budget etc. 

To get this information, publishers might want to have meetings with their partners. It’s time-consuming, but strengthening business relationships will pay off later with more demand and revenue.

Hard data and business relationships are equally important in the DPO process. Image source: Adexchanger.com

By having a complete set of hard data and business insights, the publisher can continue the creation of their demand-path optimization plan.

The strategy should cover the simplest, most transparent and efficient paths for advertisers to use to reach their desired inventory and win more auctions.

The final step in the optimization process is to execute the strategy.

Benefits Of Demand-Path Optimization

There is one obvious side that benefits the most from DPO; publishers. The other side, which is less obvious, is advertisers. But the truth is that everyone along the way will see some benefits

Let’s take a look at the benefits of DPO for both publishers and advertisers.

Business Benefits for Publishers

  • Inventory accessed easier — publishers clear the buying path for advertisers, so they could make more conscious and transparent transactions.
  • Growth in revenues — advertisers will more eagerly buy ads if it is easy and understandable for them.
  • Only transparent business partners — in the DPO process, cooperation with suspicious suppliers is terminated.
  • Better relations with advertisers – as we said earlier, one of the steps in the DPO includes face-to-face meetings with buyers. This is a perfect opportunity to tighten business ties and build trust in relationships.

Business Benefits for Publishers

Buyer identification: DPO helps publishers to identify which advertisers are buying their impressions. The IAB’s Buyer.json mechanism was created for that purpose. It helps publishers verify the media buyers that buy their inventory and provides more transparency into the media-supply chain.

Path identification: With DPO, publishers don’t have to guess the path that is taken to buy their inventory, allowing them to identify the effective and ineffective buying paths.

Elimination of bad actors: Conducting DPO allows publishers to identify and block bad actors, e.g. ad fraudsters and shady media buyers. 

Value recognition: Some ad exchanges and SSPs can take fees and not deliver enough value in terms of ad revenue. DPO helps to identify these companies and take proper action.

Increased transparency: By providing advertisers with a clear path to their inventory, publishers can help increase transparency into the media supply chain and allow advertisers to buy more impressions.

Better yield and revenue growth: Having an optimized path to their inventory helps publishers prove their value to media buyers, which helps increase their revenues.

Better relations with advertisers: As we said earlier, one of the steps in the DPO can sometimes include meetings with buyers. This is a perfect opportunity to tighten business ties and build trust in relationships.

Less risk: Conducting DPO can also allow publishers to identify which media buyers have low credit scores, pay their bills after the due date, and are at risk of defaulting on payments.

A better user experience: DPO highlights which media buyers display low-quality ads and ads that slow down the page.

Business Benefits for Advertisers

One of the main benefits for advertisers is being able to negotiate better terms as they’ll likely spend more at fewer publishers.

Advertisers can also buy premium inventory on the open marketplace (i.e. via OpenRTB), rather than having to pay a higher cost in PMP deals.

The DPO process carried out by publishers supports the SPO process carried out by media buyers and helps enforce a well-working advertising ecosystem and increase transparency.

There are also tech-related perks to DPO as a shorter media-supply chain means:

  • Fewer issues with latency or compatibility which could make ads fail.
  • A faster pace of executing auctions on publisher’s ad servers.

The Challenges of Demand-Path Optimization

There are two main business approaches that publishers and supply-side platforms (SSPs) adopt: More partnerships vs a selection of partnerships. 

For those who adopt the first approach, DPO can be a chaotic but valuable process. For those who opt for the second approach, DPO will be less challenging, but possibly less rewarding.

Here are the main challenges of implementing demand-path optimization:

Complex data: Getting the right information means searching among a lot of big sets of data, which is not an easy or fast task.

Data organization: Most data collected for DPO is in different formats, which means you either need to analyze the data individually or transform it into a common format for analysis.

How Is Demand-Path Optimization Different From Supply-Path Optimization?

DPO is the reversed version of SPO, but both processes have the same goal — to create the best path connecting buyers with sellers and increase transparency in the media-supply chain.

Publishers who use DPO focus on how media buyers buy their inventory. On the other hand, SPO engages advertisers’ attention on optimizing the path taken to purchase advertising space from publishers.

Below are the main differences between DPO and SPO.


What’s Next?

The concept of DPO emerged in 2016 at the same time that SPO was created by the Advertiser Technology Group at AppNexus. Market trends reveal that demand-path optimization will gain more interest as publishers look to increase ad revenue.

Regardless of who will perform DPO, the goal of the actions will be the same — to make an effort to help advertisers buy a publisher’s inventory more efficiently while improving business performance and maintaining a positive user experience. To assist the DPO process, the IAB created Buyers.json, a mechanism that identifies buyers of advertisements. All knowledge about Buyers.json can be found on the official IAB website.

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