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DSPs allow advertisers to purchase targeted digital advertising inventory across various publishers and media like display ads, video, mobile, and CTV (connected TV).
Businesses use DSP data to identify high-value audiences and create personalized experiences to improve their online presence, increase brand awareness, attribute CTV ad dollars to on-site conversion behavior, and more.
This guide will walk you through DSPs, starting with what they are, why they’re important to programmatic advertising, and how they work to help you turn your ad spend into real results.
A DSP stands for demand-side platform. It’s an automated programmatic platform for running, managing, and optimizing online advertising campaigns.
For example, if a user logs into Facebook and sees an ad, the DSP allows you to target this same user on Google, and across other sites they visit—all within a single campaign.
An example of a DSP interface.
Before DSPs, advertisers had separate platforms for a single campaign and contacted hundreds of publishers with offers to advertise. DSPs make ad buying faster, more efficient, and cheaper.
There are two demand-side platform types:
Self-serve DSPs are best for experienced advertising companies or advertising agencies wanting autonomy and campaign transparency on a smaller budget.
Full-service DSPs are best for companies with large budgets wishing to outsource their campaign work.
Advertising networks vs demand-side platforms:
Ad networks (not to be confused with ad exchanges) and DSPs aren’t the same and have different functions.
Ad networks aggregate and sell advertising inventory from multiple publishers to advertisers, matching ads to appropriate websites to reach the desired audience.
DSPs allow advertisers to purchase ad inventory from a wide range of ad exchanges and networks through RTB (real-time bidding). Advertisers can target specific audiences and manage multiple campaigns from a single interface.
Ad networks sell ad inventory, while DSPs buy ad inventory for advertisers.
DSPs (Demand-Side Platform) and SSPs (Supply-Side Platform) are both ad tech platforms in programmatic advertising. DSPs and SSPs integrate with ad exchanges but serve opposite sides of the market.
Here are the key differences between the two:
DSP (Demand-Side Platform): DSPs are used by advertisers and agencies to purchase digital advertising inventory from various ad exchanges and SSPs. DSPs allow buyers to reach their target audience efficiently by purchasing ad spaces that meet specific criteria such as demographics, interests, behaviors, and more.
DSPs are primarily used by advertisers and agencies looking to buy digital ad space.
SSP (Supply-Side Platform): On the other hand, supply-side ad platforms are used by publishers to manage, sell, and optimize available inventory on their websites or mobile apps. With SSPs, publishers can offer their inventory to a wide range of potential buyers through ad exchanges and DSPs.
SSPs are used by digital publishers and media owners seeking to sell their ad space.
Simply put, the DSP is on the demand (buyer) side of the process, and the SSP is on the supply (selling) side of the programmatic advertising ecosystem.
With a clear understanding of what a DSP is, let’s delve into how a demand-side platform operates.
The backbone of an advertising DSP is automated, real-time bidding (RTB), which means the advertiser sets a unique bid for every ad impression and competes for this impression during a real-time auction.
The real-time bidding process has two parties, the publisher vs the advertiser:
And two platforms:
DSPs work within the real-time bidding process like this:
This process happens within roughly 100 milliseconds when a visitor views the publisher’s site.
How the RTB process works.
For example, an advertiser works for a New York skincare brand and wants to target females ages 25-35 living in New York. They set the DSP target criteria to reflect this request.
Meanwhile, a publisher has ad space available on their website. A user, a 30-year-old female, accesses the publisher’s website. The website sends an ad request to the SSP, which sends the request to the ad exchange.
The ad exchange tells the DSPs that an impression matching the target criteria is available on a website and starts the bidding process.
Using that example, let’s say three DSPs are vying for similar parameters.
Although all three DSPs could gain something from displaying their ad to the users, DSP 1 would gain the most as it perfectly fits the target profile.
So, the DSPs evaluate the ad, match it against their target parameters, and bid on the impression based on relevance. The DSPs might bid something like:
Once a DSP buys an impression, it’s returned to the website and displayed to the user. This occurs every time a user accesses a website or refreshes the page.
Now that you understand how a DSP works, let’s examine the advantages and disadvantages of using a demand-side management platform.
Demand-side platforms revolutionized the digital advertising world, offering numerous benefits to advertisers.
With real-time bidding, advertisers can place bids on ad inventory in real-time, allowing them to compete for the impressions they want and reach their target audience more effectively.
Advanced targeting capabilities enable advertisers to precisely select their desired audience based on demographic factors such as interests, location, and browsing behavior, leading to higher engagement and conversions.
Demand-side platforms (DSPs) can significantly improve advertisers’ ad performance and return on investment (ROI).
According to the 2020 State of Programmatic Advertising survey, 70% of respondents cited success from their programmatic campaigns, while 23% cited their campaigns are very successful.
DSPs also allow for real-time ad and campaign optimization and adjustment based on performance data, leading to higher conversion rates and overall ROI.
DSPs connect advertisers to a vast network of supply-side platforms (SSPs), ad exchanges, and publishers, providing access to a virtually limitless ad inventory pool and the ability to scale their ad campaigns to reach millions of potential customers.
This opens up new opportunities for advertisers to reach their target audience across a range of websites, mobile apps, and other digital channels.
Why should advertisers use DSPs?
“If you want to purchase digital media inventory on the open internet and compete against others for ad space in front of valuable customers, you’d need a DSP to provide the best benefit for your investment.””
This increased access to ad inventory results in higher reach and better chances of hitting the target audience, potentially leading to more successful advertising campaigns.
DSPs use advanced technologies to automate the buying and placement of online advertising, freeing up valuable time for advertisers.
Tasks are handled automatically such as:
This allows advertisers to focus on the strategy and creative elements of their campaigns.
DSPs provide a comprehensive view of campaign performance data, including metrics such as impressions, clicks, conversions, and more. This data allows advertisers to optimize their campaigns in real-time, adjusting bids, targeting, and creative elements based on performance.
DSPs also provide access to valuable audience data, including demographic and behavioral information, enabling advertisers to decide who they are targeting and how to reach their target audience best.
DSPs allow advertisers to upload and use their own First-Party data, like customer information and purchasing history, to target specific audience segments with tailored and relevant advertisements.
What are the benefits of activating First-Party data?
“First-Party data is one of the most valuable assets for brands seeking an advantage in digital media. The ability to capture, segment, and activate against these data sets provides the opportunity to directly engage with potential and existing customers.”
DSPs also integrate with Third-Party data providers to supplement and enhance the insights gained from First-Party data, further improving ad campaign effectiveness.
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Despite the many benefits of using a DSP, as with anything, there are also some drawbacks.
DSPs require a deep understanding of programmatic advertising and the advertising technology that powers it. Advertisers must know bidding strategies, targeting options, and performance metrics to maximize their use of a DSP.
DSPs often offer many tools and key features that must be configured and optimized to achieve the best results. This technical knowledge also extends to data management, as advertisers must be able to manage and utilize data to inform their campaigns effectively.
With a strong understanding of the technology and expertise in programmatic advertising, advertisers may be able to fully leverage a DSP’s capabilities and realize their campaigns’ full potential.
DSPs often partner with Third-Party data providers to offer more accurate tracking and reporting capabilities than a single network can provide. Unfortunately, Third-Party data is subject to changing regulations and privacy concerns, which can impact the availability and use of this data.
And with Google constantly vacillating between phasing out Third-Party cookies or keeping them around, it’s difficult to know what the future holds for DSPs.
DSPs use automated algorithms to purchase and place ads on various websites and platforms, and advertisers have limited ability to influence specific placements. This can result in ads appearing on websites or in contexts that are not ideal or may harm the advertiser’s brand.
Advertisers must balance the benefits of automation and targeting with the limitations on ad placement control to achieve the best campaign results.
Many DSPs offer limited ad targeting options, challenging advertisers to reach their desired audience precisely.
DSPs often have a pre-set list of ad networks and exchanges, limiting the flexibility for advertisers to choose their preferred partners.
What are some disadvantages of using DSPs?
“There isn’t a lot of differentiation between different DSPs regarding the inventory types offered, the audience targeting methodologies available, and the partners.”
For example, he says that if you need to buy a pair of Nike sneakers, you can go to different stores like DSW, Amazon, and the Nike store to buy the same shoe model. That’s a lot like how DSPs work. You have the same inventory types and targeting methodologies, but if you need something customized, you’re “limited by the confines of how a DSP operates.”
DSPs also have reporting-side shortcomings.
What are the reporting limitations of a DSP?
“Many DSPs have a limited data retention period, requiring additional investment to expand the data set and visualize historical data into actionable reports. Examples include log-level data, ad servers and automated reporting solutions.”
In some cases, DSPs don’t provide enough data granularity to allow advertisers to optimize their campaigns based on their specific marketing goals. Also, the data may not always be accurate or up-to-date, resulting in incorrect actionable metrics and decisions.
DSPs allow advertisers and agencies to purchase ad inventory from many sources through a single interface.
Here are some of the best Demand-Side Platform (DSP) examples:
Each DSP comes with its unique strengths, and the choice often depends on the specific needs and goals of the DSP advertising company, such as the type of audience they wish to target, the formats they prefer, and the level of control and transparency they require.
Despite the few limitations of a DSP, advertisers can’t go without it these days.
What was life like for advertisers before using DSPs?
“Before DSPs, programmatic advertising was a manual, non-transparent process akin to being faxed a digital media performance report. The digital media industry was similar to living in a house with a lot of potential, but no plumbing in place. Upfront agreements were done via a publisher rolodex in hopes of quality inventory. The modern day version of a DSP connects the audience to inventory. This shift from a manual and complicated process to automation has greatly improved the programmatic advertising supply chain.”
DSPs bridge the gap between the advertiser’s desired audience and publisher inventory. They gather audience data to help advertisers find the most effective ad space for optimal performance.
Without DSPs, programmatic advertising would be stuck in the advertising Stone Age with advertisers manually managing campaigns and inventory, resulting in a waste of time and ad spend.
By automating the process of ad bidding and buying, DSPs allow advertisers to reach high-value audiences with personalized experiences. With two types of DSPs available – self-serve and full-service – businesses of all sizes can find a solution that meets their needs.
Whether you’re an experienced advertiser looking for autonomy and campaign transparency or a company with a large budget looking to outsource ad work, DSPs provide a cost-effective and efficient way to reach the right people at the right time. You can turn your ad spend into real results with a clear understanding of DSPs and their operation.
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