The SPO effect: How GroupM saved $1.5 million in supply fees

WPP’s media investment behemoth drove savings through a preferred supplier relationship with Index Exchange.

Why you should care: For a while, media agencies lost their key value add — negotiating clout — to automation in the programmatic supply chain. But by partnering with select programmatic supply partners, they’re able to regain that leverage by negotiating fees and add value by ensuring transparency for clients.

Agencies have been leaning heavily into supply path optimization (SPO), which allows media buyers to find the most efficient, effective and transparent path to programmatic supply.

For GroupM, which kicked off its premium supplier strategy in the U.S. last year via a partnership with supply side platform (SSP) Index Exchange, the effort has paid off.

The media buying giant says it has saved $1.5 million in supplier fees on the Index relationship alone, leading it to seek out other preferred supplier deals with SpotX (recently acquired by Magnite) in October, and PubMatic in March.

GroupM and Index have developed discounts, products and deal structures as part of the preferred relationship. In particular, reducing the exchange fee, or “take rate” that Index places on each bid, has led to $1.5 million in savings in programmatic supply chain costs. 

Fee reductions increase based on GroupM’s spending volume and are reinvested back into the auction.

“It’s about bringing buying power to programmatic,” said Evan Krauss, SVP of buyer development at Index Exchange. “The more GroupM spends with Index, the lower fees we take. The net bid increases and buyers win more of the impressions they are trying to get.”

The partnership hasn’t just saved GroupM money, it has also unlocked operational efficiencies by better packaging inventory across publishers based on ad formats and pricing.

Previously, buyers would have to set up separate deal IDs, or programmatic direct integrations, for every single type of ad unit sold by a single publisher. Index has helped GroupM package similar ad formats across publishers with a single deal ID, reducing friction for buyers. The solution has been used so far by 75 brands.

“Buyers don’t have to set up hundreds of deal libraries,” said Michael Moore, director of programmatic development at GroupM. “That felt like low-hanging fruit in terms of operational efficiency.”

Cookie crumbs

While the savings and efficiencies “have been material,” the relationship isn’t all about cutting costs, Moore said.

GroupM has leveraged identity solutions from Index as cookies phase out on Google Chrome. One such product matches hashed email addresses to publisher data on users a brand is trying to reach, with the help of onboarding vendors like LiveRamp.

The match is done on the publisher’s page before each auction, so a buy reaches the right audience before an impression is bid on, Krauss explained. “Some models just spray impressions and then check against the audience at the end. This is making sure the audience matches first.”

But what will come of such solutions when Google stops supporting independent identifiers, including hashed email addresses, next year?

Krauss and Moore argue the practice will remain kosher because the match happens on the publisher's page, as opposed to a buying platform. “It's increasingly about how we lean into supply partners who are closer to audiences,” Moore said.

Consolidation

As companies such as GroupM, which manages more than $60 billion in media spend annually, cherry pick preferred supply partners, the crowded SSP category is undergoing mass consolidation.

GroupM plans to select five or six preferred SSPs to drive the majority of its spend, with exceptions based on inventory and geographic requirements.

“We want to do as much as we can with as few partners as possible to make sure we're holding our consolidated investment principals in mind,” Moore said. “It’s about making sure instead of five shallow conversations, we’re having one deep one.”

Part of GroupM’s premium supply program focuses on working with trusted publishers, which are often larger. But as buyers move away from the programmatic longtail in search of higher-quality inventory, smaller local news outlets are getting left behind. 

To avoid that, GroupM has identified more than 5,000 local news sites and is building direct integrations with local news consortiums who can help it access these publishers.

“It's about how we create meaningful connections at scale,” Moore said. “We can't have deal IDs with every local news site, but how do we work with aggregators helping those publishers connect to us?”

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