What Is the Demand Side Platform?

Reading time: 7 minutes

If you’re new to the world of programmatic advertising, then you have quite a bit to learn. Technologically speaking, the ad tech world has come a very long way. Ad buying and selling wasn’t always something that could be set up in real-time and handled in a matter of milliseconds. It actually took much, much longer.

Now, the entire process of buying and selling ads online has been streamlined through certain optimization efforts. Optimization is essential to the digital efforts of all online advertisers and publishers, and demand-side platforms and supply-side platforms are just two of the ways in which this optimization has occurred. 

Thanks to demand-side platforms, advertisers now have the opportunity to work with even more publishers than ever before. 

But that’s not all.

In this article, we’re going to tell you everything you need to know about demand-side platforms, including how they work and how they benefit advertisers and publishers. 

Keep reading to learn more.

What Exactly Is a Demand-Side Platform?

A demand-side platform — DSP for short — is a programmatic advertising platform (a type of software) that allows advertisers and other media buying agencies to automatically bid on ad inventory from a wide range of publishers. 

DSPs essentially automate the decision-making process regarding how much should be bid for ad inventories in real time. This is one of the ways in which DSPs make the ad-buying process that much faster and cheaper.

One of the most important things to understand about DSPs is that they don’t just buy ad inventory from publishers quickly and efficiently. What they’re actually buying is the ability to reach more specific audience segments based on the DSP’s targeting capabilities across a multitude of publishers’ sites. 

This is precisely what makes DSPs an evolutionary step in the ad network realm.

How Do DSPs Work?

On a technological level, DSPs are a pretty complex thing to explain. 

The quick and simple version of how a DSP works is that it’s a platform that has been engineered and designed to allow advertisers to buy up ad inventory from an incredibly vast pool of publisher sites. In addition to reaching a larger pool of publishers, DSPs also work to target specific users based on specific demographics and other information such as browsing behavior.

On the publisher’s end, they make their ad inventories available through marketplaces referred to as ad exchanges. Ad exchanges are what the DSPs connect with to decide which impressions would make the most sense for the advertiser in question based on their audience targeting criteria.

The price of these ad inventories, which is another component of the programmatic ad process, is determined by the real-time auction via the real-time bidding process. This negates the need for any human interactions, as in ad sales people negotiating prices with media buyers (the traditional method). With real-time bidding, the ad inventories are auctioned off to the highest bidder according to the predetermined criteria — and the whole process happens in a matter of milliseconds.

Essentially, DSPs are used in place of traditional ad buying for a more efficient ad bidding process. Here’s an overview of the actual steps within that process:

  • First, the advertiser chooses their target audience based on user demographics and other important data to connect with publishers that provide similar criteria or audience segments via SSP. 
  • From there, the advertisers upload the ads they want to publish.
  • While all of this is happening, publishers are making their ad inventories (or impressions) available to the DSPs using SSPs and other ad exchanges.
  • The SSPs or ad exchanges offer up these inventories/impressions to the DSPs, which are responsible for making the decision to send a bid (in real-time) for the impressions based on the targeting criteria and their relevance to the inventory.
  • During this time, multiple advertisers may be competing for the same ad impression and placing real-time bids.
  • The winning DSP ultimately buys the impression and from there, the advertiser’s ad (or ads) show up on the publisher’s website.

Once again, this entire process is completed within milliseconds as soon as a user visits the publisher’s website.

Is a DSP an Ad Network?

If all of the above sounds similar to what an ad network is and does, that’s because DSPs have incorporated A LOT of the characteristics we see from ad networks. For example, access to a larger pool of ad inventories, targeting capabilities based on user criteria, and so on. 

However, DSPs have the advantageous capabilities of being able to buy, serve, and track ads using one centralized platform. This also includes the ability for advertisers to optimize their campaigns more efficiently — whereas ad networks simply don’t have these capabilities. 

Think of it this way: In today’s digital advertising world, it’s all about data. Data is how we know what to track, who to target, what’s working and what isn’t. What’s more, ad networks have a tendency to mark up the ad inventories since they take a sizable cut from the action. DSPs charge a basic fee per transaction.

In a sense, you could say that DSPs are replacing ad networks as they provide a more efficient and cost-effective method of ad buying. However, ad networks aren’t exactly down for the count just yet. The rise of ad exchanges has caused a shift in the ad network model, encouraging ad network agencies to offer up more DSP-like products with real-time bidding capabilities. 

At the same time, a lot of DSP companies are beginning to follow the older ad network methods of buying up inventories, repackaging them, and then reselling them to advertisers at premium prices. Therefore, you could say that DSPs are essentially the newest generation of ad networks since they seem to be trading tricks as they compete with one another.

How Does Targeting Work in a DSP?

Throughout this article, we’ve mentioned the targeting capabilities that DSPs provide and how important user data and audience targeting are in an ad campaign. But how exactly does this targeting work?

It all has to do with the following data:

  • Behavioral data, which includes information about the user’s behavior, such as their interests and online behavior. For example, what websites they’ve visited in the past, which products they’ve purchased, the ads they’ve interacted with, and so on.
  • Contextual data, which involves information regarding the website or mobile app, such as the content, the URL, categories and subcategories of the content, etc.
  • Demographic data, which is information regarding the actual user, as in their age, gender, job type, location, ethnicity, and things of that nature.

As for how the DSP accesses all of this information, it mostly has to do with third-party brokers and data management platforms (DMPs) — both of which collect user data from various online and offline sources, ranging from data cookies to surveys and more.

When it comes to using a DMP, the DSP will sync cookies to exchange this user data to use for targeting. Information with contextual data or system-related data, like device, operating system, and browser type is usually exchanged through the bid request sent from the SSPs or ad exchanges.

What Are the Benefits of Using a DSP?

There are several advantages of using a DSP for all types of media buyers and advertising campaigns, especially compared to the more traditional methods of manually buying ad space from publishers.

Let’s take a look at those advantages:

Real-Time Automated Bidding

With real-time bidding, the entire negotiation and buying process between publishers and advertisers is completely automated, which is what allows it all to happen so quickly. The entire process of ad inventory analysis regarding value, budget, and targeting happens in milliseconds — all while the user waits for the page to load.

Greater Access to Inventories 

One of the greatest advantages of using a DSP is that these platforms work to consolidate a larger supply of ad inventories into one convenient place. This enables advertisers to extend their reach to a larger pool of publishers and a more diverse selection of inventory compared to the limitations they face connecting with publishers on their own. 

What’s more, the ad inventories are typically broken down into categories, making the selection that much easier regarding where advertisers want their ads to be placed. Ad placement is important for companies looking to create brand awareness, which is why safe ad placement comes with premium prices.

Better User Targeting

DSPs can capture all kinds of data regarding user behavior which they use to improve the advertiser’s targeting and optimization for ad rotation and remarketing. By providing a stronger user targeting functionality, advertisers can rest assured that their ads will reach the right audience at the right time — every time.

More Room For Optimization

DSPs typically provide advertisers with a centralized dashboard that allows them to see the performance of their ad campaigns right away. This gives advertisers and other media buyers the necessary information they need to track and optimize their campaigns for higher efficiency and better results.

Demand-side platforms work to make digital campaigns much easier for advertisers and media buyers. They also help to guarantee better bid deals, inventories and targeting values. If you’re not working with a DSP, you’re potentially losing out on a global pool of publishers and their ad inventories — which can undoubtedly maximize your ad campaign efforts.

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