What is a DSP (Demand-Side Platform)?
The accuracy and efficiency that big data brought to our lives is now changing the landscape of media-buying. Thanks to big data, the object of demand today is the target audience instead of advertising space itself. Thus, those advertisers who have access to the demand-side platform have access to the tool that makes this data work.
DSP advertising helps the brands to find their perfect customers whatever the platform, device, or screen they’re using. It provides an opportunity to understand how they interact with the ad before they purchase the product online, and predict their behavior in the future.
What is a Demand-side Platform?
DSP stands for Demand-Side Platform, a software that is used for programmatic ad buying, typically via bidding in RTB auctions. The purpose of the DSP is to buy the impressions on the suitable inventory and show them to the users that meet the target requirements for the optimal (minimum) price.
DSPs are commonly used by advertisers, in-house marketing teams, advertising agencies or Agency Trading Desks (ATDs). Utilizing DSPs, media buyers get access to multiple SSPs, Ad Exchanges, and Ad Networks through a single interface, allowing them to purchase rich media, video, mobile, and native ads in real-time. The process of buying inventory is performed automatically within seconds making the trading less time-consuming and much more profitable.
DSPs are the flip side of SSPs (Supply-Side Platforms). SSP is a technological platform that represents the interests of the publisher and sells advertising inventory. The DSPs transmit the bids from advertisers along with inventory requirements to SSPs. When the winner of the RTB auction is defined, taking into account the interests of both parties (advertiser and publisher).
What was wrong with manual placing?
In the early days, digital ads were bought and sold by ad buyers and salespeople. DSPs were designed to minimize the need for negotiations between media buyers and publishers, making the process cheaper and more efficient with automation. With the appearance of DSPs, the need for manual deal negotiation has completely vanished.
Buying ad space in real-time through DSPs gives advertisers the opportunity to run ad campaigns to the target audience at the right time, screen, and ad format.
The power of the DSP is in its ability to automate the decision-making process: decide which impression to bid on and calculate the maximum value of each impression. During the RTB auction, the system programmatically sorts off impressions and defines the highest bidder. The winning bidder pays the price determined by the second-price auction: not the actual highest price but the second highest bid offered, plus $0.01. That’s how the fair price defined by this mechanism prevents the advertiser from overpaying.
What is the difference between DSP and Ad Network?
Indeed, demand-side platforms at times offer the same features as ad networks do, targeting and the ability to reach a large pool of potential resources are among them. The fact that most DSPs offer a single tool for the ad campaign launch, optimization, and analyzing, gives them a significant advantage over ad networks that don’t have all-in-one functionality. Thus, DSPs do not add margins to the inventory. Instead, they charge a fee only when a transaction takes place.
After some time, both DSP platforms and ad networks found the way how to benefit from the situation without losing service quality. Ad networks adjusted RTB bidding opportunities, while DSPs are also buying the premium inventory and resell it with added margins.
How DSP works: must-know tech aspects
Defining the game rules. We’ve just found out what is DSP, and it’s time to get a little bit more nerdy to understand how it works. By using the DSP campaign building tool, an advertiser provides parameters about the desired target audience such as gender, age, location, annual income, etc.
Do you want to distribute the budget throughout the day evenly? Here you go, the “Daily cap” option allows you to distribute the budget throughout the day. The “lifelong pacing” option permits even budget distribution over the lifetime of the ad campaign. Want to make sure your ads are shown only on good-quality websites? Block web pages with sensitive content, create the white and blacklists of publishers you’d want to deal with or avoid forever.
All the manipulations, configurations, tuning, and optimizations are up to the advertiser, after all, that’s why this thing is called a self-served demand-side platform. There are also managed service DSPs and full-service DSPs, explicitly designed for advertisers who feel that their expertise is insufficient and who need support during campaign management.
How RTB bidding happens. The DSP analyzes each inventory to decide whether it is valuable for the advertiser, whether it fits the requirements and targeting settings. If it does, the DSP automatically calculates the maximum cost of that inventory and sends the bid response back to the exchange. The price of a bid is based on the advertiser’s pre-set budgeting data and user information such as location, demographics and browsing behavior. Due to machine learning algorithms and prediction mechanisms, the analysis of the ad impression takes milliseconds.
Why do media buyers use DSP in advertising?
1.Global Reach and Integration
Most DSPs integrate with RTB Exchanges; however, some of them provide access to premium or high-class inventory while others don’t. Some DSPs are connected to global Ad Exchanges, whereas others start partnerships with local premium publishers only.
Almost all DSPs give access to a range of inventory worldwide on desktop and mobile screens and allow media buying in multiple currencies. When choosing a DSP, it is important to find out beforehand what traffic verticals and ad formats the DSP supports.
2. Effective Targeting
The demand-side platform definition would be incomplete without targeting. Precisely this function utilizes the user data to make the message as relevant as possible to the viewers.
DSPs can target:
- according to the geolocation, county, city, time zone;
- according to gender, marital status, income, level of education, language, interests (this is extended targeting enabled by integration with DMP which aggregates first, second, and third-party data);
- according to the device (desktop, mobile, tablet);
Such options as frequency capping (how often the same ad appears in front of the same user), dayparting (which part of the day) make advertising even more individualized. The cookie-level retargeting will help to find the users who once visited your website but didn’t convert and remind them about the offer. Each RTB DSP platform may use different kinds of data, like unique first-party data or third-party data collected from DMPs (Data Management Platform). DSPs may integrate with DMPs, this way they access additional audience data essential for campaign optimization and retargeting.
Some DSPs focus mainly on CRM data, whereas others specialize only on mobile data. Hence, before choosing a DSP, it is crucial to find out what data your DSP uses, which segments it focuses on and how big is the reach for those segments.
3. Right Inventory and Brand Safety
The first thing that determines the success of RTB campaigns is the inventory choice. Since DSP platform allows to pre-define the type of inventory for purchasing it’s easier to aim for success. For instance, in-app ads typically have higher engagement rates than mobile or desktop. Knowing such fact, the brand that strives to raise engagement can choose to serve impressions only in apps.
Another example, the brand wants to promote the new mobile game. The logical step will be showing the creative in other apps since the product is not working on the desktop.
As for brand safety: adding some of the applications to the whitelist, the advertiser can shorten the inventory selection period, immediately posting on the sites with the highest performance. The blacklist, on the contrary, can eliminate the inefficient inventory or block fraudulent or potentially harmful sources for the safety of your brand’s image.
4. Reporting and Campaign Analytics
Demand-side platforms allow advertisers to track the performance of their ad campaigns in real-time. Most DSPs offer granular statistical reporting on click-through rate, website traffic, page view, engagement rates, and more.
Regardless of the fact, that the ad campaign runs across different Ad Exchanges at the same time, a DSP gathers information from all sources. After this, it delivers it as a consolidated custom report. Reporting helps to see what works and what doesn’t and to define a strategy for future campaigns more effectively.
5. Minimal budget
DSP advertising allows small and medium brands to launch and customize their advertising campaigns. This move reduces the extra costs typically consumed by third-party service providers. Most DSPs make it possible to start a campaign having a couple of hundred dollars on personal balance.
It’s worth to notice that every Demand-Side Platform has own pricing model. DSPs work on CPM, CPA, CPE, CPI or a CPC basis, each of which has its own specifics of calculation. As a rule, CPM (cost per mille) is one of the most widespread of them. In such a model, the payment is counted per thousand impressions.
Since the DSP platform is bidding each time on a different impression, the payment is distributed evenly, after each impression served, not 1000 impressions at once. The auctions run according to the second-price auction. The winning bidder pays the second-highest bid for inventory plus $0.01, (not the actual highest winning price).
The critical thing to remember is, the pricing models featured above do not contradict each other. Those are the parallel directions that can effectively complement and reinforce each other for the majority of programmatic media buying ad campaigns.
Dispelling the Misconceptions of DSP Marketing
It’s worth to point out that working with RTB DSP platform doesn’t mean having to deal with a remnant inventory. It’s correct only to some extent. For instance, picture yourself as a website owner, sure thing you'll have specific priorities considering selling your best advertising space.
The higher the pricing you’re offering, the higher are chances you’ll give an advertiser the preference, the rest of the space could be commissioned to programmatic. Does it make the inventory worse in quality? Absolutely not, this is the same top-notch space, but without the purchasing volume guarantee.
RTB DSP: the Perfect Platform’s Characteristics
Independent. Look at the top demand-side platforms. It doesn’t take much time to figure out what makes them strong. First of all, those platforms have their technologies and in-house team of developers and engineers who constantly upgrade the product and improve their capabilities.
Unbiased. It is essential that the advertiser would be able to make decisions freely and choose a supplier of inventory and data independently. Only this way it is possible to achieve KPIs set by a particular advertiser. In other words, the perfect DSP platform is unbiased.
Customizable. What does it mean? As we already found out the RTB (Real-Time Bidding) ecosystem is an extensive network that includes such key players, like DSP, SSP, and DMP. While launching the ad campaign, the advertiser should be free to choose partners for collaboration. Same way, it should be easy for the media-buyer to exclude suppliers that perform worse than others while the campaign is running.
Start growing your business easily advertising on self-serve DSP!
The total customization of the media-buying process can be achieved with White Label DSP. Purchasing DSP based on the white label model guarantees that brand owners meet their unique business objectives, work flexibly, and remove intermediaries from the trading process. The main task of the demand-side-platform is to provide the media-buyer with a personal account, show all the capabilities of the inbuilt tools, and receive the feedback. It is a win-win system: the advertiser gains professional skills, and the platform analyzes the data to understand the needs and expectations of the advertising market better.
The list of Demand-side Platforms
Top demand-side platforms in 2018 didn’t only strengthened their positions on the market but evolutionized and added the cutting-edge tech features to the functional set to stay competitive.
The necessity to support all-screen formats and optimization features is what drives renown brands to custom demand-side platforms that can be fine-tuned individually. Technical augmentations and individualization, however, are not the only reasons for that:
The data ownership. Utilizing own advertising DSP is about more freedom and control at the same time. Collected user data and technology belong to the brand that means advertisers are free to leverage them how they want to achieve high ad campaign performance. The personal user data management becomes less risky as there’s no need to entrust the customer data to intermediaries and there’s no room for the data breach or loss.
Commission fee elimination. Since the programmatic chain includes an enormous amount of intermediaries, such as ad tech providers, traffic arbitrators, and agencies (if involved), all of them consume a particular fraction of the advertiser’s budget. Running down the pipe, the budget disperses, and the publisher receives only half of the cost. Own DSP works transparently, eliminating third-party services; such a system removes the need for additional fees and commission.
Flexibility. DSPs in advertising can offer an immersive pool of features and augmentations. Sometimes they’re honest about having such a functional set, but on the flip side, such platforms are not one-size-fits-all. White label DSP allows brands to build solutions suited for special needs, demands, business objectives, and functions according to the product roadmap. Striving for more flexibility and control?
Contact us and build your custom White Label DSP!
IRINA KOVALENKO, CMO OF SMARTYADS