Less than 50% of advertising dollars actually reach the publisher; we need a more efficient, better quality, and more sustainable ad ecosystem
While the future of media buying and the broader ad ecosystem in 2023 may be murky, one aspect is clear: online advertising is broken. Why? The incentive system that largely excludes time and attention causes perverse behaviors. There are too many ads, many of which go unseen. And even if they are seen, most are only partially visible for a fleeting moment, not nearly enough time for a consumer to recall an advertisement with any meaningful clarity.
Moreover, the market is cluttered with intermediaries that simply trade traffic between each other, exploiting inefficiencies in the system. Every so often the inefficiencies generate a fee rather than adding value for consumers, advertisers, and publishers. The more volume, the more inefficiencies, and thus the more opportunities to grab a fee.
The result? Less than 50% of advertising dollars ever reaching the publisher.
In its latest report, digital marketing consultancy Jounce Media stated that “the average RTB enabled publisher monetizes through 27.8 directly integrated sell side technology companies and authorizes 16.2 of these partners to initiate resold auctions. Rebroadcasting supply chains account for 45% of display auctions and 37% of video auctions.” In addition, Jounce estimated that in the past three years, the volume of bid requests for the top 10,000 websites, mobile apps, and CTV apps that collectively represent 94% of all real-time bidding requests has more than tripled in just two years — from 205 supply paths in 2020 to 622 as of late 2022.
An unnecessarily complex system that relies on trading and reselling ad space to generate fees, rather than one of transparency and directness, drains revenue from publisher pockets, decreases advertisers’ return on spend — and most of all — makes the consumer experience miserable.
All of this contributes to the outsized carbon footprint of digital advertising. Identifying and measuring inefficiencies in the advertising supply chain, as advocated by companies such as Scope3, Cavai and others, and making that data visible to ad buyers so they can make “carbon conscious choices” in how they spend their ad dollars, is a solid step forward to reducing carbon emissions.
Here are a few of the ways that we are working to create a more efficient, better quality, and more sustainable ad ecosystem.
Reducing ad waste by delivering on attention
Multiple studies have shown that the longer the viewable time of an ad, the greater its effectiveness, whether in driving conversions or brand recall, although this impact is only observed once the ad has been in view for at least two seconds. Frequency is important too: seeing the same ad twice for 15 seconds is worth more than seeing the same ad once for considerably longer.
To help capture the information publishers and buyers need to identify and target engaged audience segments, we have devised a new measure of attention called “engaged time.” Engaged time measures not only when an ad is in view, but also when a person is actively engaged with the content. This ability to analyze ad performance and turn attention into increased revenue is the foundation of Sovrn Signal.
It makes sense, then, that the most valuable audience segments are those paying the most attention. And publishers who can deliver clear attention signals to buyers can command higher rates for high-value inventory. Instant scarcity is created; as much as 40% of all digital advertising wouldn’t make the cut. From there, the price paid scales up alongside the ad performance until it hits a diminishing return.
Solving for quality
We strive to provide buyers and sellers with a safe, transparent, and fair marketplace and consistently ranks as one of the top exchanges when compared to our peers. This is based on how few security violations are served by ad tags. To do so, our team of supply quality experts ensures each publisher transacting on the Sovrn Ad Exchange meets a set of site, ad inventory, and traffic guidelines. This reduces supply that exists solely to exploit algorithmic buying on the open exchange, and increases the probability that our publishers’ ad experiences deliver on marketer outcomes.
Filtering low- to no-demand ad requests at the front door
Before conducting an ad auction, we filter out ad units with a low likelihood of generating viewability and attention before sending them to Demand Side Platforms (DSP) partners. If we determine an ad request is unlikely to receive bids from a DSP, we discontinue processing and no auction is held. This eliminates approximately 20% from our Ad Exchange’s 80 billion daily requests, reducing the energy needed to serve up that traffic.
Reducing infrastructure footprint
Starting this quarter, we are migrating our traffic to the Amazon Web Server cloud to dramatically cut down the infrastructure required to operate the Sovrn Ad Exchange. According to Amazon, companies using AWS rather than their own on-premises infrastructure typically reduce carbon emissions by nearly 80% by tapping into a cleaner mix of solar and wind power. By the end of 2023, 100% of Sovrn Ad Exchange traffic will be hosted in the cloud on AWS.
Optimizing traffic shaping by DSP
In 2023, we are strengthening our traffic shaping capabilities to better predict which DSPs will participate in an auction to ensure we are issuing bid requests to probable auction participants. In other words, rather than sending bid requests to every DSP for every auction, we use historical bid data per DSP to predict whether or not they will submit a bid. This way, if we don’t expect a bid, we don’t waste energy by asking them to participate in our auction.
Commitment to sustainability
These are just a few of the actions we are undertaking today to help improve the digital advertising ecosystem. Our goal is to add value to the advertising supply chain by routing requests to the right buyers, eliminating unnecessary ad calls, providing great products like Signal to help buyers find valuable audiences that are paying attention, and deliver quality content supply to make the internet an awesome marketplace of ideas, content, and commerce.
As we continue to innovate and deliver on our sustainability goals, we will share our progress to highlight what we are doing, how we are measuring it, and how we are holding ourselves accountable.