Ad buying and selling wasn’t always as easy as it is today. Over time, the online advertising market has streamlined and optimized the buying and selling of ad space, consolidating supply and demand on ad exchanges. Now, thanks to supply-side platforms and demand-side platforms, publishers can reach a wider range of advertisers, while advertisers enjoy lower prices and better tools for tracking ad performance.
What is a Demand-Side Platform (DSP)?
A demand-side platform, often abbreviated to DSP, is a programmatic advertising platform that allows advertisers and media buying agencies to bid automatically on display, video, mobile and search ad inventory from a wide range of publishers.
A demand-side platform can automate the decision-making process on how much to bid for an ad in real-time. DSPs make the ad-buying process significantly faster, cheaper and more efficient.
The key feature of demand-side platforms is that instead of buying inventory on publishers, what you buy is the ability to reach specific audience segments based on the DSP targeting capabilities, across a range of publisher sites.
Demand-side platforms are an evolution of ad networks, which have been incorporating capabilities like real-time bidding into their offering as well.
Why Are Demand-Side Platforms Important?
Because demand-side platforms allow for the management of advertising across many real-time bidding networks, advertisers no longer have to manually contact hundreds of publishers with offers to advertise.
Since marketers no longer have to spend time and energy on something that can be completed by an automated machine, they can set up campaigns quickly and manage them with ease.
What is Programmatic Advertising?
Programmatic advertising is the process of automatically buying and selling digital advertising space. It connects publishers with ad inventory to advertisers, offering a smarter, faster alternative to manual digital advertising. Any formats and channels can be accessed programmatically, thanks to programmatic platforms that have built up their ad inventory and database.
In the US, 85% of digital display advertising spending was transacted through programmatic technology in 2020. Most online advertising now is done programmatically through real-time bidding and direct deals.
How Does a Demand-Side Platform (DSP) Work?
Demand-side platforms are used by advertisers to replace manual ad buying with an automated, real-time bidding platform. The whole process can be summarized in the following steps:
- The advertiser selects their target audience and uploads the ads they want to publish.
- Publishers make their ad inventories available on the DSP through ad exchanges and supply-side platforms.
- These platforms offer the ad impression to the DSP, which makes a decision to send a bid to buy the impression based on relevance to the targeting criteria.
- The advertiser competes with other advertisers for the ad impression placing bids in real-time.
- The demand-side platform buys the impression and the ad is shown on the publisher’s website.
This whole process is conducted in milliseconds when someone visits the publisher’s site.
What is the Difference Between DSP and SSP?
The supply-side platform (SSP) is a technology platform used by publishers to connect their inventory to ad exchanges. An SSP allows publishers to filter ads by the advertiser and other criteria, as well as set different rates for ad spaces to define the cost.
DSP refers to the demand-side platform. It allows the buyers of digital ad inventories to manage multiple ad exchanges via one interface.
The buyers commonly include trading desks, agencies, or advertisers directly. The demand-side platform must plug into an SSP to enable the buyer to bid on digital inventory.
Simply put, a DSP and an SSP connect to different parts of the programmatic ecosystem. A demand-side platform (DSP) is a tool used by advertisers to help organize ad-buying, whereas a supply-side platform is used by publishers to automate the sale of advertising space, which is the supply-side of the demand-side platform.
What Are the Main Components of a DSP?
Although different companies may have different elements or different names, they all share a similar structure to fulfil their role of serving ads programmatically.
Let’s take a closer look at the components that make up many of today’s DSPs.
The bidder is the most important element of the DSP, as it’s what places bids on ad impressions on a real-time bidding (RTB) process. As the RTB process concludes in milliseconds, being able to execute the bid as fast as possible is crucial. Most DSPs use multiple data centres spread around the world to minimise latency. Demand-side platforms use analytics to forecast impression bids based on historical information.
The ad server of the DSPs is what actually serves the required ad elements to the publisher’s website. But they do much more than that. Ad servers also track the impression and conversion data, which can then be used to optimize the ad campaign. They also have fraud prevention functionality, to detect false ad inventory. A demand-side platform can have its own ad server or integrate with an external one.
Campaign tracker and reporting
A key element of a DSP is the ability to track and record data about the ad effectiveness: impressions, ad viewability, clicks, CTR, conversions, ad spends etc. This is then presented on a reporting dashboard and used in the ad campaign optimization.
DSPs record user data when they view an ad served by the DSP. Over time, they build a profile of the user, allowing them to assign them certain characteristics and place them in an audience segment, based on the type of content they are consuming, where, and which ads they are clicking on. The user profile database is used in remarketing campaigns and ad optimization.
This element can be known in DSPs as the banker or the cashier. It’s what allows the advertiser to define the budget parameters of the campaign, like defining a maximum budget for the campaign. The budget manager can also define rules about how the budget is spent.
DSPs integrate with ad exchanges and SSPs for advertising space, but they also integrate with other tools to increase their functionality, like data management platforms, analytics platforms, payment gateways and brand safety solutions, which enhance the risk management capabilities of the DSP.
Ad exchange and SSP integration
One of the benefits of working with a DSP is the ability to reach multiple ad exchanges and supply-side platforms. Integrating several supply sources allows a demand-side platform to consolidate and centralize the ad-buying process, allowing an advertiser to have a wide cross-channel reach from a single source. Therefore an advertiser would expect their DSP to integrate with several ad exchanges and SSP.
What Are the Types of Demand-Side Platforms?
There are two types of DSPs: self-serve and full-service DSPs.
A self-serve DSP is just a platform an advertiser can use to buy advertising. Campaign ideation, execution and reporting are performed by the advertiser’s team or their agency.
A full-service DSP behaves more like an agency. They provide additional service through an account manager. An external team in the DSP takes control and responsibility of the ad campaign from start to finish. It’s more expensive and the advertiser has less control and flexibility over the campaign execution, but it’s more convenient for advertisers.
How Do DSPs Help Advertisers Buy Ad Space More Efficiently?
Advertisers and media buyers enjoy several advantages by using DSPs to execute their advertising campaigns over manually buying advertising space.
Advantages of using a DSP
1. Automated, real-time bidding
First, RTB streamlines and automates the negotiation process between media buyers and sellers. The whole process of analysing the ad impression offered and bidding on that impression taking into account budget, value and target is performed in milliseconds while the user is loading the page.
2. Inventory reach and selection
Another key advantage is the consolidation of supply in one single platform. Using a DSP allows advertisers to reach a wide range of publishers from one single provider, a more diverse and global ad inventory than they can do on their own. This inventory is often classified by different characteristics which allow a brand to choose carefully where they want their ads placed. This is important for brands which place a premium on being able to choose a safe placement for their advertising.
3. User targeting
All the data that the DSP captures about user behavior is used to improve the targeting, optimize the ad rotation and provide remarketing capabilities. Having a strong user targeting functionality ensures advertisers they can reach the users they need across any digital properties they visit.
4. Reporting, analytics, and optimization
Advertisers value the ability that DSPs provide to see the performance of their ad campaigns in a consolidated dashboard. This gives advertisers and agencies more information to act and optimize their campaigns to be more relevant and provide more value to their target audience.
What Kind of User Data Do DSPs Employ for Targeting and Bidding?
Demand-side platforms have access to multiple sources of user data they can use to build their targeting strategies and optimize their bidding.
First, they have their own data collected from ad impressions and ad clicks, like ad spend, CTR, CPC or ROI. This campaign performance information is complemented with other sources:
- User data imported by advertisers from their own CRM. Advertisers can use their own data to create specific targets for remarketing campaigns or to build lookalike audiences based on their customers’ profile.
- Publishers can also provide information about the content where the ad impression sits and about the user that triggered the ad impression. This data includes demographic information about the user, including their location and type of device they use. It can also include behavioral information, like browsing and shopping history.
- DSPs also purchase information from third-party data brokers and exchanges that can be used to build custom audience segments based on the criteria specified by the advertiser.
What’s the Difference Between Ad Networks and Demand-Side Platforms?
Ad networks and demand-side platforms are quite similar. They provide basically the same services around programmatic advertising, but DSPs incorporate more advanced features regarding real-time bidding and audience targeting, which in ad networks is restricted to a set of predefined audience segments, instead of the custom targeting criteria of DSPs.
These platforms are an evolution of ad networks. And the line between the two is blurring since ad networks are incorporating many of the features that set DSPs apart in the first place.
Demand-Side Platforms Are a Key Player in the Online Advertising Ecosystem
DSPs have disrupted and introduced key innovations in a process that was regarded as inefficient, due to the necessary negotiations and back-and-forth between media buyers or advertisers and publishers.
The consolidation of supply in a single platform that automates the ad buying process through real-time bidding brings transparency, accountability and enhances the ability of advertisers to reach their target audience through a wider range of publisher sites.