Demand-Side Platform (DSP): A DSP is a software system that lets ad buyers to buy and bid in real-time to show their online ads and manage their ad inventories. The ability to choose which ad to purchase enables advertisers to target their intended customer circles.
Like a paid search, DSP lets users optimize their strategies using a preferred benchmark such as eCPA or eCPC. Taking over some of the functions of advertising networks, such as serving ads, DSP offers much more including real-time bidding, ads tracking, vertical and lateral tracking, all typically within one platform.
With so much on offer, many third parties are now integrating it directly into their system to allow better tracking and management. In today’s article, we discuss the various facets of the demand-side platform.
How Does it Work?
Demand-side platforms are becoming ubiquitous as they allow advertisers to programmatically buy ad impressions on publisher properties (websites, mobile apps, etc.) from a diverse ad inventory in real-time. Demand-side platforms, along with supply-side platforms, form the core of programmatic advertising.
DSPs introduce efficiency by eliminating the manual process of media buying. DSPs work in quite an elaborate fashion, but here’s a gist of it.
The process begins with the advertiser using the campaign builder tool (offered by the DSP) to set the audience targeting criteria and upload ad creatives.
Publishers enlist their ad inventories on the ad exchange through an SSP. The ad exchange communicates with the DSP about the availability of an ad impression. The DSP analyzes the impression based on the targeting criteria and its relevance to the advertiser and makes a bid to buy the impression.
The DSP buys ad impressions in real-time through a process known as during the real-time bidding (RTB) auction. After the DSP purchases the ad impression, the ad is displayed on the publisher’s website.
This entire process takes place within a few milliseconds
According to research by Market Study Report LLC, the demand-side platform market will increase its annual revenue from $9.7 billion in 2019 to $31.3 billion in 2024. Advertisers are looking to dive deep into programmatic advertising and the compound annual growth rate (CAGR) of 26.3% demonstrates this.
Here’s how DSPs help advertisers manage their programmatic campaigns:
- Interact with ad exchanges or SSPs to purchase ad impressions on publisher websites or apps
- Optimize campaign budget spend to get the maximum ROI
- Integrate with third-party tools to improve targeting capabilities, prevent ad frauds, and manage payment transactions
- Provide an intuitive UI and repository to help advertisers manage their campaigns and ad creatives respectively
- Track advertising metrics and generate reports.
What Are the Types of Demand-Side Platforms?
A demand-side platform is categorized into two types, viz. self-serve and full-service. Here’s a brief explanation of each:
1. Self-serve DSPs
A self-serve demand-side platform allows advertisers to create, manage, and optimize ad campaigns without external assistance. A self-serve DSP puts all the responsibility of ad campaigns right from ideation to execution to analysis on the advertiser’s shoulders. While a self-serve DSP reduces overhead costs and gives advertisers full control over their campaigns, it is an easy-to-moderate learning curve, depending on in-house expertise.
2. Full-service DSPs
A full-service demand-side platform lets you manage your ad campaigns through an account manager and sales representative. Advertisers have to commit to a minimum budget for every campaign when using a full-service DSP.
Although these DSPs tend to be heavy on the wallet, they let you outsource the responsibility to an external team. Large-scale organizations with hefty budgets tend to opt for full-service DSPs.
The biggest downside of them, however, is that campaign management is not as flexible as self-serve DSPs. To make the slightest change, you need your account manager to get it done, and ir could take some time depending on their availability.
Ad Networks vs. Demand-Side Platforms
It might seem that ad networks and DSPs provide the same offering. In fact, they do, but they both operate in a starkly different function. Here are the key differences.
The most significant difference between an ad network and a DSP is the feature set. DSPs enable advertisers to manage the purchase, optimization, and analysis of the ads through a single interface, whereas ad networks offer a limited set of features aimed at audience targeting and ad media buying.
The capability of participating in real-time bidding (RTB) sets DSPs apart from ad networks, although several ad networks are catching up with the trend and now support RTB auctions.
Ad networks tend to be rigid in their targeting feature. Advertisers are restricted to choose from the available audience segments. On the contrary, with DSPs, advertisers are free to reach out to their audience by applying their targeting criteria.
What Is the Architecture of a Demand-Side Platform?
DSPs help brands and advertisers set up and manage programmatic ad campaigns. Although the makeup of DSPs differs based on the type and company, here is the fundamental demand-side platform architecture.
The bidder evaluates the ad inventory offered by the SSP and places the right bid amount during RTB auctions. Typically, a DSP maintains multiple bidders at different data centers along with the advertiser’s audience targeting parameters to reduce latency. The bidder can place bids across multiple RTB auctions. The bidder is capable of forecasting the price of the ad inventory based on historical data, predicting the traffic for the inventory and the ad click-through rate (CTR).
2. Ad Server
Ad creatives and the ad markup are stored on the ad server. The ad server decides and serves the ad creative to the publisher’s website and tracks the conversion data.
The ad server determines the best value per impression and identifies fraudulent ad inventory to prevent ad frauds. The built-in conversion tracking feature helps advertisers optimize their campaigns as required.
3. Data Platform
The data platform tracks interactions from the bidder and ad server. The data platform can integrate an external data management platform (DMP) to enrich user profiles.
4. User Interface (UI)
The user interface is the visual elements advertisers see when managing ad campaigns. The UI allows advertisers to create and manage ad campaigns and view campaign performance among other functionalities.
The banker makes sure that the campaign expenditure doesn’t exceed the campaign budget. The banker is also known as the cashier. Certain DSPs have add-on features that allow advertisers to manage budgets uniformly throughout a campaign’s duration.
6. Campaign Tracker
As the name suggests, the campaign tracker tracks campaign performance and reports metrics such as the win rate, impressions, clicks, cost per impressions, CTR, etc. The conversion tracking mechanism uses pixels or the post back method to track conversions. The campaign performance data is then forwarded to the reporting database.
7. Reporting Database
The reporting database consolidates the campaign performance data collected by the tracker. The reports are displayed on the UI dashboard for users to glean insights from.
8. User Profile Database
This database stores user details such as their characteristics, the segments they’re part of, ads they’ve viewed, their conversion data, and so on. The user profile database is useful during remarketing campaigns.
Third-party integrations can enhance the functionality of a DSP. A DSP can integrate with ad exchanges, payment gateways, DMPs, analytics platforms, and brand safety solutions.
To enable advertisers to manage and optimize their ad campaigns, a DSP should provide the following key features:
1. Audience Targeting Capabilities
Advertisers can reach out to the different segments of their audience by applying various targeting criteria. Generally, DSPs offer the following audience targeting capabilities:
Geo-targeting: Targets audience based on their location data such as country, city, state, or zip code
Demographic Targeting: This includes data such as their age (or age group), gender, education, job title, income, etc.
Behavioral Targeting: Targets users based on their interests and behavioral traits such as websites visited, products purchases, product usage data, etc.
Contextual Targeting: Places ads relevant to the website/mobile app content, URL, or website category
Device Targeting: Shows users ads on specific devices or operating systems to enhance personalization
Retargeting: A form of behavioral targeting to target users that have visited your website before and can also help you run highly contextual ads
2. Bidding Strategies
RTB auctions determine the prices of ad impressions. Therefore, most DSPs follow the CPM (cost per mille, i.e., 1000 impressions) model. Some DSPs modify the CPM model by offering a maximum or variable CPM pricing to optimize the campaign budget.
If you’re looking for performance-based metrics, DSPs also provide CPC (cost per click) and CPI (cost per install) bidding strategies.
3. Budgeting Strategies
To ensure that your budget lasts throughout the campaign duration, DSPs enable advanced budgeting options such as daily budget, campaign pacing, and a lifetime budget.
4. Advanced Targeting Options
The targeting capabilities let you reach your ideal audience while ensuring your budget is spent efficiently.
Day Parting: This feature allows advertisers to run campaigns on a schedule for optimum campaign visibility
Frequency Capping: To avoid ad fatigue, advertisers can set the number of times a user will see that ad during a day or the campaign lifetime.
Brand Safety and Protection: This feature ensures that ads don’t appear on dubious websites; advertisers can either target premium websites or apps or blacklist websites and audiences that can be detrimental to the campaign performance.
5. Access to Premium Inventories
DSPs are connected to a large number of ad exchanges, SSPs, and networks that enable advertisers to connect with audiences around the world. Advanced integrations such as mobile inventory integration further increase the reach.
6. Campaign Management
The campaign management feature allows brands to manage all campaigns and their budgets through a single interface. Advertisers can maintain a repository of their banners and creatives using the creative management tool.
7. Real-time Analytics
Real-time analytics lets brands and advertisers measure the campaigns performance in real-time. The data is presented in a visual format for the ease of comprehension. Although advertisers don’t act on a whim despite the availability of real-time data, by observing outliers or poor performing factors, they can take corrective measures as soon as possible.
DSPs have circumvented the manual media buying process that was inefficient and consisted of negotiations between the advertiser and publisher with plenty of room for fraud and flaws. Their ability to bring together a vast pool of publishers, coupled with the introduction of accountability through analytics, has led to the adoption that we see today.
With customization opportunities, an ideal DSP allows advertisers to choose ad inventory on their own without bringing in any bias. However, considering the investment required, small businesses can opt for independent ad platforms to execute their advertising efforts.