Ad Tech & Ad Ops

What is a Demand-Side Platform (DSP)?

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Digital advertising is not just about an advertiser placing an ad creative on a publisher’s website. It involves platforms on the sell-and buy-side constantly work to maximize the advertiser’s RoI and publisher’s revenue.

So, in order to find the perfect inventory for their creatives and the perfect ads for their inventory, both buy-side and sell-side work with different platforms. One of such platforms is DSP or demand-side platform.

What is a Demand Side Platform?

A DSP or a Demand-Side Platform is a system that offers demand management to buyers / advertisers. DSPs helps advertisers look for and buy inventory from the marketplace. Demand-side platforms are also responsible for managing real-time bidding for advertisers. They keep advertisers informed by sending them updates about upcoming auctions.

DSPs work to make advertiser campaigns successful, similar to what SSPs do for the publishers. An SSP (Supply-Side Platform) manages inventory for publishers and helps them get a better price and fill rates.

Some well-known demand-side platforms for advertisers are DoubleClick Bid Manager, MediaMath, AppNexus, LiveRamp, and DataXu.

Why Do Advertisers Need DSPs?

Back in the days, publishers and advertisers used to deal one-on-one. In such deals, they used to sit together and negotiate deals. If both parties agreed, an insertion order was signed and then the ads were placed. This was a time-consuming process, and the negotiation was not always appreciated by both the parties.

There was a need for a mediator to conduct the exchange without wasting time and striking a good deal for both parties at the same time. Hence, the industry evolved and we got DSPs, along with SSPs, and ad exchanges.

Demand-side platform quickly took charge of managing the buyer’s requirements, resulting in profitable campaigns for them.

How does a DSP work?

Advertisers experience strong competition while bidding for impressions. At this point, it falls down on the DSP to fight on their behalf and win the ad impressions. Here is how DSPs work for advertisers:

In real-time bidding, the auction starts when a user opens a web page to check the site content. The entire bidding process takes hardly a few milliseconds. But there is a lot that happens in these milliseconds—from a user clicking on the site link to him/her seeing an ad on the screen.

On the demand side, it starts with the advertiser designing an ad campaign with the DSP. For instance, if an advertiser wants to target users between the age group of 20 to 40 who use Windows OS and are interested in learning programming languages, he/she can create the campaign based on these specifications and demographics

After receiving the campaign instructions, the DSP actively starts looking for such users by contacting multiple ad exchanges. If a target user appears, the SSP quickly forwards the user’s data to the ad exchange and ask it to find a creative that would be relevant for the user.

The ad exchange then contacts the DSPs looking for users with such specifications and conducts an auction. The winning bid is selected based on the floor price set by the publisher and creative is placed. Here, the DSP bids on behalf of advertisers, based on the set budget.

demand-side platform working

Similarly, advertisers set up multiple campaigns in order to market their product, and increase leads and conversions. And each campaign follows the same process involving a DSP.

Pros of a Demand-Side Platform

Better targeting: The granular campaign targeting and settings provided by DSPs help advertisers get leads on valuable users that have high chances of conversion.

Better campaign management: Generally, a DSP uses algorithms to fulfil the needs of the advertiser. This is done by putting the advertiser’s demand first and looking for the inventory accordingly. Advertisers can also check the progress anytime using the DSP’s dashboard.

Access to a variety of inventory: A DSP stays in contact with multiple ad exchanges and continuously tweaks its software to improve targeting. This gives advertisers access to a variety of inventory for running ads.

Assistance from experts: DSPs usually assign a support person to help the advertiser in case of technical difficulty or support for any other matter.

Saves time and effort: Finding the perfect inventory and placing bids can be a troublesome and time-consuming process for advertisers. DSP do the legwork of finding inventory and placing relevant ads, allowing advertisers to focus on campaign strategies and business growth.

Cons of a Demand-Side Platform

Complexity: Sometimes, managing a DSP and product marketing strategy can be overwhelming for advertisers. For instance, setting up a targeting campaign and assigning different targeting factors can take time to learn for advertisers. Think of it as a new software which requires the advertiser to take out time to understand its use.

Costly for small advertisers: Advertisers need to pay DSPs for their service. This can either be a monthly or an annual charge. Hence, for small advertisers or advertisers with a low budget, this can be a dealbreaker.

What Have We Learned?

With the rise of programmatic buying, technologies like demand-side platforms, supply-side platform, and ad exchanges emerged. Demand-side platform help advertisers manage their bids and ad campaigns. From finding a valuable impression to placing the ad creative, DSP enables advertisers to buy mobile, search, and video ads from the marketplace.

DSPs also offer better targeting options and save time for advertisers. They works on increasing the return on ad spend (ROAS) by making advertiser campaigns successful. However, it can be complex for new advertisers to understand DSP’s functionalities. And advertisers with a tight budget may find it difficult to afford the services of a DSP at all.

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