Magnite, The Trade Desk, and GroupM are all vying to establish themselves as indispensable components of an evolving programmatic landscape.
These companies have introduced new products and partnerships to develop their value, find more efficient supply paths, and fight for relevance in a maturing advertising ecosystem. The strategic machinations of these three companies are unfolding before us, and they all tie back to the theme of disintermediation in one way or another.
But what is disintermediation?
This financial term has bled over into programmatic advertising and has found increased usage in the trade press, event panels, and meeting rooms.
Disintermediation is the process of cutting out one or more middlemen from a transaction, supply chain, or decision-making process.
Disintermediation succinctly describes a possible result of several new products introduced by The Trade Desk, Magnite, and GroupM. But is disintermediation the intent? Or is it the unavoidable result of implementing logical business decisions?
This article will explore two products from the two largest independent ad tech companies. Each company created its respective product to find efficiencies through disintermediation:
- The Trade Desk OpenPath
- Magnite ClearLine
We will also explore another product that may have formed due to the threat of being disintermediated:
- The GroupM Premium Marketplace
Each initiative is unique, but they all orbit around a nucleus of specific market dynamics. The physics metaphor is apt since it is relatively easy to understand each product, but grasping their interplay poses a much more daunting task.
Let's examine publicly available information and figure out what is happening here.
GroupM Premium Marketplace
Early last year, GroupM introduced the GroupM Premium Marketplace, a self-proclaimed "unified programmatic marketplace that will increase media buying transparency and efficiency." GroupM created its premium marketplace through strategic partnerships with Magnite and Pubmatic.
But why does the world need this product? GroupM goes on with that reason:
Through this marketplace, GroupM will centrally manage its media investment, creating competitive bidding advantages, best in market technology costs, and end-to-end supply chain transparency.
It sounds like GroupM wants to leverage its hefty might to negotiate preferred rates with publishers or take over negotiation altogether. GroupM could offer value to its advertisers who may want to avoid dealing with individual publishers or navigating the complex programmatic ecosystem.
By funneling all inventory through a GroupM SSP seat, the agency can create a centralized place to create programmatic deals, manage vendor costs (fraud, viewability, etc.), and conduct supply path optimization. Rather than dealing with this mess across many of their clients using disparate DSPs, GroupM can manage everything on the supply side in a centralized platform aggregating the inventory.
Additionally, it allows GroupM to curate and package certified grade-A inventory into programmatic deals of their design before firing them off to their clients' DSPs. Advertisers may lack the resources to interface with every publisher and negotiate with their associated sales teams while keeping tabs on all the publisher supply they're buying.
GroupM could create private marketplace deals (PMP) for its clients, opening up pipes of premium inventory that buyers can bid on from their chosen DSP. Advertisers can then purchase programmatic inventory as usual but with the comfy cozy understanding that their loving agency artisanally crafted these deals that could span multiple publishers.
GroupM could also use its outsized influence to pressure publishers to provide valuable signals they may otherwise not want to share, like content metadata. The agency can then use these signals to curate inventory and optimize spend.
This whole initiative may represent an effort by the agency to prove its value and save itself from being disintermediated by DSPs. Reports of agencies souring on the cozy relationships DSPs are building directly with advertisers may have driven GroupM to spearhead its premium marketplace.
Advertisers have grown accustomed to purchasing media on intuitive platforms offered by Google and Facebook, and more effective DSP technology may convince more advertisers to bring programmatic in-house, lessening their reliance on the programmatic expertise of their agency. GroupM may have perceived a worrying trend and decided to amp up its services.
We will return to the concept of the premium marketplace later, but first, let's turn our gaze toward the biggest independent DSP of them all, The Trade Desk, and examine their plan to find marketplace efficiencies, threatening the relevance of SSPs in the process.
The Trade Desk OpenPath
Shortly before the GroupM Premium marketplace announcement, The Trade Desk announced OpenPath. OpenPath allows The Trade Desk to bid on display inventory directly via a Prebid adapter, obviating the need for an SSP.
I wrote an article about OpenPath last year, so we will only revisit a few details here. Just understand that a Prebid adapter allows the Trade Desk to bid on display inventory without an SSP by plugging into an auction conducted outside of the SSP, and the winner is sent directly to a publisher's ad server to compete alongside direct-sold demand.
Typically, a publisher's Prebid wrapper (code on the page resolving the auction from various Prebid adapters) would solicit bids from SSPs, and then those SSPs would call their DSP partners for bids. SSPs would then collect a fee for any demand running through deals that publishers set up on their platforms.
OpenPath could allow advertisers to spend more on media since there would be no SSP fee. OpenPath would also enable The Trade Desk to understand the actual asking price of any piece of inventory before SSP PMP fees or any other added costs driving up a floor price like audience fees or vendor fees (fraud, viewability, etc.) or any artificial floor price inflation from deceptive practices.
We know The Trade Desk has opted out of all buying through Google Open Bidding, but they may eventually opt out of bidding elsewhere. It is only logical for The Trade Desk to offer tools for advertisers to opt out of buying from any SSP offering redundant supply paths already available via OpenPath.
For example, if The Trade Desk has an OpenPath integration with a particular publisher, and that publisher is selling inventory via Magnite and OpenPath, why would a buyer choose to execute a buy through Magnite if they can find a more direct path to that same inventory via OpenPath?
"There's a phenomenon here that feels a little bit like reality TV," Green said, "where there's so much effort to create drama in our space."
The Trade Desk CEO, Jeff Green, dismisses claims of competing with SSPs as an effort by the trade press "to create drama in our space." While intentional or not, OpenPath presents an existential threat to SSPs since it provides buyers a shortcut to publisher inventory. As for the drama, come on, Jeff, this is as spicy of a topic as we get in ad tech. Let us have some fun with it.
Drama and intention aside, OpenPath is an entirely rational concept for both publishers and buyers. The Trade Desk now has a direct line to publisher inventory which is great from a business perspective. It's a win, win, lose — a win for buyers and publishers, but a loss for the SSPs left on the sidelines.
We have seen The Trade Desk take the opportunity to ensure everyone they are not competing with SSPs:
The Trade Desk is not entering the supply side of digital advertising and will not provide supply side services, such as yield management.
But the fact is that OpenPath does threaten SSP business — but TTD has reason not to rock its relationship with certain SSPs.
While DSPs typically hold the keys to the riches by commanding the technology used by those injecting revenue into the programmatic ecosystem, those buyers still need quality supply. That quality supply may only exist in a handful of places, especially in scarce marketplaces like connected TV.
So what's an SSP to do to survive in this suddenly cutthroat ad tech world? Give DSPs a taste of their own medicine, and leverage the scarce CTV market and strategic acquisitions to their advantage.
Magnite has had its sights set on connected TV for years now. If you don't remember, the name "Magnite" resulted from a rebranding effort following the merger of Rubicon Project with the video-focused Telaria platform in 2020.
Magnite's insatiable desire for the juicy margins of CTV drove them to gobble up another formidable premium-video SSP and my former employer, SpotX, in 2021. The video feeding frenzy continued when Magnite acquired the video ad server SpringServe in 2021.
Whether Magnite's strategy to buy itself into CTV relevance will work remains to be seen. Can this company assemble its acquired parts into a mean-lean advertising machine?
Like a primordial sea creature sprouting legs to escape the confines of a hostile ocean, we may witness a similar evolution as Magnite adapts to a rising tide of change. The threat of OpenPath is contained to Magnite's display business (for now) — but the initiative may have spooked Magnite into action to protect their CTV interests by teaming up with familiar allies — advertising agencies.
Supply-side platforms don't typically develop products for the buy-side since the platforms serve publishers and provide tools to sell inventory programmatically. But Magnite has pounced on the opportunity to continue embracing new customers from the buy-side.
As we learned at the beginning of this article, Magnite is already familiar with developing products alongside agencies, like the GroupM premium marketplace — but now they have embraced their new customers by offering another new product, Magnite ClearLine.
From Magnite's press release:
Magnite, the world's largest independent sell-side advertising company, today announced the launch of ClearLine, a self-service solution that provides agencies direct access to buy premium video inventory on the company's platforms. Built on Magnite's proven technologies in deal-driven video, ClearLine significantly increases spend going towards working media, makes it easier for sellers and agencies to securely share data, and helps Magnite publishers generate more revenue and develop new sources of unique demand.
A self-service solution that provides agencies direct access to buy premium video inventory. Notice the product's positioning is for a particular customer set (agencies) and only for a specific inventory type (premium video).
ClearLine only focuses on "premium video," a marketplace typically synonymous with connected TV and with notoriously scarce inventory relative to its more mature sibling, display. Also notable is, The Trade Desk's OpenPath does not support CTV.
Connected TV offers a logical opportunity for Magnite to enter the programmatic self-service buying game, given their hyper-focus on the lucrative allure of CTV, as demonstrated through their acquisitions. But it also allows Magnite to front-run the possibility of The Trade Desk expanding OpenPath to CTV.
Magnite has already teamed up with GroupM to help create their Premium Marketplace that the agency can use to control private marketplace (PMP) buys — but ClearLine could allow the agency to deliver programmatic guaranteed (PG) deals:
ClearLine is based on technology Magnite publishers have used for years to manage their traditional direct sold demand through the ad server...Though ClearLine adapts this functionality for agencies, it benefits sellers by providing another way to generate revenue and capture unique demand. Serving sellers remains Magnite's primary mission.
So Magnite is using the SpringServe ad server acquisition by opening it up to agencies to serve "traditional direct sold demand". Also, like The Trade Desk, Magnite felt the need to reassure us that serving their existing customer set remains a priority.
Serving sellers remains Magnite's primary mission.
If I may attempt to translate this corporate-speak:
We want our existing clients to feel nice and need to reassure the DSPs that we aren't pivoting our entire business to compete with you, just some of it.
Magnite may have spotted an opportunity to usurp the PG advertising business of agencies from DSPs like The Trade Desk.
Unlike a seemingly infinite amount of display inventory, CTV offers a finite amount of consumer attention for sale. The scarcity of supply gives publishers more leverage in negotiating rates and methods of execution than their display-focused brethren.
CTV publishers can push for programmatic execution methods that benefit their business, like programmatic guaranteed. Programmatic guaranteed (PG) deals offer advantages for publishers over private marketplace (PMP) deals.
The main advantage of programmatic guaranteed is in the name — "guaranteed" revenue for the publisher. Publishers sell these deals expecting to deliver a set amount of impressions, typically at a fixed price in a specific time range. This guarantee gives the publisher peace of mind that they will make a predetermined amount of money and allows for accurate forecasting of future available inventory.
There is an expectation set that buyers should not layer on any targeting in their DSP for PG deals since doing so would limit the amount of available inventory — and there is typically a bid rate threshold set between an SSP and DSP (90%+). So DSPs need to respond to PG bid requests at or above the % expectation since these deals are "guaranteed."
People may sometimes call PG deals "dumb pipes" since DSPs can't apply fancy algorithms, audience targeting, or frequency capping to uphold the agreed-upon response rate threshold. Consequently, DSPs and SSPs charge a lower fee for PG since inherently less technology is at play.
In contrast, PMP deals allow buyers to leverage a DSP for all its worth to do things like algorithmic buying, pacing, frequency capping, audience targeting, and more. PMPs typically operate on a floor price rather than a fixed price allowing buyers to submit bids for precisely what they think each impression is worth — or what their DSP tech tells them what each impression is worth to achieve their goals — earning DSPs a higher % fee for their troubles.
DSPs are less incentivized to develop additional PG features since they push negotiating power away from the buy side, offer few opportunities for technological differentiation, and earn less revenue for the DSP.
So maybe Magnite saw a chance to swoop in and provide an alternative execution path for campaigns delivered via PG deals since they already own an ad server (SpringServe) capable of orchestrating "dumb" video ads that only need a fixed price, flight dates, an impression goal, and not much more.
Magnite says that "ClearLine significantly increases spend going towards working media," — but how? Well, there are only a few ways to do this if they are trying to replace PG:
- Charge less than the DSPs to deliver these types of campaigns
- Cut out SSP fees
From the ClearLine announcement:
GroupM has long been a driver of supply path optimization, to maximize the working media and reduce supply chain costs," said Andrew Meaden, Global Head of Investment at GroupM. "We partnered closely with Magnite to launch our GroupM Premium Marketplace (GPM) and now, with ClearLine we can activate GPM's capabilities faster and further, allowing our clients to spend more on media and messaging and less on fees and technology costs. This is the next step to accessing guaranteed quality video supply at scale without the need for a DSP across certain kinds of inventory transactions or unnecessary hops between the buyer and publisher.
- Maximize working media
- Reduce supply chain costs.
- Lower fees and technology costs
- Access quality video supply at scale without needing a DSP across certain kinds of inventory transactions or unnecessary hops between the buyer and publisher.
These themes echo the GroupM Premium Marketplace: accessing quality video supply and reducing technology + supply chain costs. But does ClearLine do this without "unnecessary hops between the buyer and publisher"?
ClearLine could eliminate a hop between a publisher and advertiser in the specific instance that the publisher already leverages Magnite technology — but we know that is not true for all publishers. But if Magnite opens up ClearLine to non-Magnite publishers, they would only replace a hop: instead of the jump between the publisher's SSP and an agency's client's DSP, there would now be a hop between the publisher's SSP and SpringServe.
However, if Magnite reduces the technology costs for publishers, agencies, and their clients, this could be a win for buyers and sellers since advertisers can devote more spend to media and not fees.
The drama of disintermediation
That was a lot, but the cursory overview of all these products is necessary to equip someone attempting to conclude anything about this possible fad, idea, or business strategy of disintermediation. Programmatic disintermediation is an abstract concept that neatly describes the result of each product outlined in this article — not something these companies may have set out to do intentionally.
Perhaps the drama of disintermediation is overplayed since I don't think any of these companies sat down one day to figure out how to cut other companies out of programmatic transactions. Businesses can capitalize on solving inefficiencies and exploiting and adapting existing strengths. Each of these products sprung into existence to do just that or as a response to the threat of someone else doing that.
Publishers and buyers should take advantage of this trend of disintermediation. Negotiate favorable economics with your technology partners so they can retain your business, put your inventory or spend in platforms with the most efficient supply paths, and figure out who is clogging up the middle with unnecessary hops or fees.
Ultimately, these products may only shift the money flowing through programmatic pipes today to new sources and slightly alter programmatic execution methods. GroupM may construct PMP deals from the firehose of inventory in their Premium Marketplace instead of advertiser clients working with publisher sales teams. ClearLine may move PG money from The Trade Desk to Magnite, and OpenPath could divert revenue from flowing through SSPs altogether.
I do not believe any of these products will immediately usher in the type of drama-filled disintermediation cataclysm that a bored ad tech writer craves — but it could represent a genuine change in the execution of advertising transactions that may impact any company with a programmatic business, whether they like it or not.