“What is a DSP, and how does it work?”

A demand side platform, or DSP, is a software platform that allows advertisers to buy space for online advertising. It is part of a larger system known as programmatic advertising, which automates much of the advertising process. On the other side of the system is the Supply Side Platform, or SSP, where publishers offer available space. In the middle are a number of ad exchanges, where the bidding, buying and selling of ads and space happens.

In this article, we will go over topics including demand-side platform, real-time bidding, and media buyers inventory.


Old School Advertising

To begin to break this down, it is helpful to think about traditional advertising in a newspaper or magazine.

The magazine publisher reserves a certain amount of space for ads, knowing that advertising is a significant source of revenue. The cost of advertising will depend on several factors. Different parts of the magazine have different values to advertisers. A spot near the front is more likely to be seen than ads on the last few pages. A full-page is more noticeable than a smaller ad.

Advertisers also have to make choices based on their audience strategy, trying to determine the population they want to reach. They need to do research to see who is buying which magazine and how their advertisement complements the content of the magazine. A beer company might note that many football fans also have an interest in beer. They will then buy space in a sporting magazine.


Internet and Mobile Advertising

Many of the same principles remain in effect when thinking about internet advertising.

The online publisher is still trying to get the best price for the space on a website or mobile app. The advertiser is trying to get the largest audience and a good click through rate at the cheapest price.

The biggest differences are the amount of potential advertising space and the speed at which buying and selling has to happen. Every time a user lands on a web page, advertising space becomes available. Every time a web page loads, information about the user is sent to the ad exchange where it becomes part of the process of determining what ads the user will see. A bidding war happens quickly in the background, leading to the unique advertisements that pop up on the web page.


Programmatic Advertising

This background bidding war is where programmatic advertising comes into play. Using a supply side platform, the publisher offers available space for advertising, information that is sent to an ad exchange.

Using a demand side platform, advertisers have declared a budget and asked for space that will be seen by particular audience segments. In the ad exchange, bids are taken automatically from several advertisers and, in milliseconds, the space is awarded to the highest bid. The top demand side platforms are connected to multiple ad exchanges, meaning they can negotiate for space through multiple channels.

As this process continues, the advertiser will use the data reports of the DSP, perhaps linked to data management platforms, to improve its audience strategy. The DSP can report the number of times the ad was displayed, and the number of times users interacted with the ad. If an ad has a good click through rate on a particular site, the advertiser can raise the maximum bid for getting displayed on that site, or use a more direct purchasing process.


How Do DSPs Help Advertisers?

The main way that DSPs are helpful to advertisers is by streamlining the whole buying and selling process. With the speed of the internet, there is no way that a marketing team could negotiate in a timely manner. There are just too many potential impressions opening and closing all the time.

Other ways that DSPs can help an advertiser include:

  • Targeting and Retargeting. Because the DSP does some of the work of data management platforms, ads can be developed and sold for specific audience segments. Each time the campaign runs, information comes back to the advertiser allowing it to fine tune the audience. This process extends the life of an ad campaign, saving money on development.
  • Audience Segmentation. Much of the programmatic advertising system is about gathering information. The ad exchange is receiving information about users, which it uses in the bidding process. It then sends that information along with user action reports. This information allows advertisers to make more informed decisions, targeting users by age, location or technology platform.
  • Automatic Bidding. The heart of the DSP is the bidding process. Space is sold quickly and efficiently whenever advertising space becomes available.
  • Ad Variety. Some DSPs are ad specific. For example, a native ads platform will only work with this style of ad. Some of the top demand side platforms allow advertisers to negotiate for native ad space, traditional display ad space and mobile ad space.
  • Reporting. One of the most helpful things for an advertiser is the analytics and reporting that are part of a DSP. This information can allow a business to get a better handle on its advertising budget. Most importantly, DSP analytics help advertisers see how effective its ad campaigns are in real time.


How to Get the Best Use from a DSP

Using DSP is a serious marketing investment.

There are some important ideas to consider to get the most value out of this platform:

  • Know Your Budget. Your advertising budget is a key factor in working with a DSP.
    If it is too low, you will be consistently outbid for space. If you have a limited advertising budget, you may want to use a direct sale model.
  • Learn Your Audience. In order for a DSP to work well for you, it needs information about the kind of spaces you want. The more your instructions are targeted toward a specific audience, the better the platform can negotiate for meaningful ad space.
  • Consider the Best Ad Format. If you only want to work with native ads, you will want to use a native ads platform. Otherwise, you can work with a broader DSP that will search for more options.
  • Have a Goal. The system works best if you know what you are looking for in terms of click through rate, effective cost per click or number of views. If you have determined some of these goals ahead of time, you can use DSP analytics much more efficiently.