What Is A Demand Side Platform (DSP) And How Does It Work?

The world of digital advertising is constantly shifting to reflect new advances in ad tech.  Demand Side Platforms (DSPs) are quickly taking center stage in the realm of modern advertising.  But why?

What makes demand-side platforms (also known as “buy side platforms”) such powerful tools, and how can they help modern businesses streamline their online advertising efforts and eliminate many of the commonly associated headaches?

DSPs: Brass Tacks For The Curious

DSPs are companies that leverage automation to save advertisers time, money, and hassle in the selection and setup of their digital advertising.  This is known as a programmatic approach to advertising, since it employs software in place of human employees and negotiations in ad purchasing.

DSPs sell impressions to advertisers on a wide variety of publisher sites.  An impression is when a single browser on the web clicks on a single ad from one ad network (essentially, it’s one interested person pursuing one particular web ad).  These impressions are then targeted to users on the basis of their location, their interests as determined by previous web searches, and other individualized criteria, to heighten the potential effectiveness of a given ad and secure more business from advertisers.

These impressions are made available to buyers through digital ad exchanges, where DSPs automatically decide in a matter of milliseconds which impressions will be most effective for an advertiser to purchase.  The purchase is then automatically executed by the DSP on behalf of the advertiser in a process known as real-time bidding (RTB), in which the impression is sold to the highest bidder on the exchange within milliseconds as the webpage hosting the impressions is loading.  The “winner’s” ad will then appear on the site once the page loads.

DSPs Vs. Traditional Ad Networks

One of the primary distinctions between traditional ad networks and DSPs is their pricing model.  Whereas ad networks operating with human employees usually mark up the prices on their services, DSPs simply charge a flat fee for carrying out a digital transaction.  As the concept has progressed, many DSPs have also opted to specialize, catering specifically to video or mobile ads, for instance.

A “human touch” will always be necessary in creating and carrying out a successful ad campaign.  Human creativity and strategies still count, and DSPs and ad exchanges don’t replace those vital elements of campaign-building.  But in terms of reducing manual waste in the process of buying impressions from publishers, they’re second to none.  They also give advertisers the convenience of managing and tracking a campaign with a conveniently centralized tool, as opposed to interfacing with numerous companies and individuals.

Many advertisers also claim that choosing a successful ad placement is a totally objective and data-driven matter.  And it’s simply a statement of fact that automated tools like DSPs are better equipped than humans for processing large amounts of data and rendering objective decisions from them.

Supply Side Platforms (SSPs) Vs. Demand Side Platforms (DSPs)

Supply side platforms (SSPs), also known as sell side platforms, are also connected to digital ad exchanges.  But they have a “mirror image” relationship to DSPs, so to speak.  SSPs allow publishers (websites, blog owners and other digital entities with ad space to sell) to procure the highest possible rates in the quickest possible way for their inventory of advertising space.

Publishers leverage SSPs for many of the exact same reasons that advertisers use DSPs, but from the opposite vantage point.  They’re looking to get the maximum amount of revenue for their ads in an automated fashion.  And in just the same way DSPs and ad exchanges help advertisers reach their goals, they’re the perfect tool for publishers as well.  Here’s why.

Ad exchanges and SSPs have become known among digital publishing sites as “yield optimization platforms”.  This is because they’re uniquely suited to help publishers maximize their revenue through real-time bidding, or automatic digital auctions in which the highest-bidding advertiser is awarded the impression.  The SSP is programmed to accept the highest possible bid on behalf of the publisher, with zero reliance on human negotiation (not to mention bypassing the issues of salespeople…errors, negotiation time, and of course their price markups).

SSPs also allow publishers more control over their inventory of impression space.  Publishers can connect their SSP to multiple ad exchanges, which gives them access to more potential buyers (advertisers) than ever before.  This allows them more freedom to strategize.  They can establish “price floors”, or minimum prices for which they’ll sell their inventory.  They can also choose to target specific types of advertisers and not others, depending on the type of website or blog they run.  This is hugely important from a strategic vantage point, because certain ad categories will reliably bring in more revenue than others, based on what’s being advertised and to whom.

Summing Up

DSPs and SSPs are ushering in a new era of cost-saving for advertisers, revenue optimization for publishers, and heightened speed and convenience for both.  Real-time bidding eliminates the need for human salespeople on the publisher end, and cost negotiators on the side of advertisers.  This allows both parties to reach their goals in an elegantly streamlined way.