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What Is a Demand-Side Platform (DSP) and How Does It Work?

Everything You Need to Know About Demand-Side Platforms (DSPs)

Technology has revolutionized the advertising world. Traditional advertising is no longer the only option marketers have to promote their products or services. Thanks to developments in technology, they can now reach their target audience on the internet, where users spend 155 minutes on average every day.

Online advertising is now one of the most effective ways to get people to notice your brand and move them down the sales funnel. It’s no surprise, then, that U.S. advertisers spent almost $50 million on programmatic digital display advertising in 2018. This is what ultimately helps them raise brand awareness and achieve various marketing goals. And they can set up their advertising campaigns in only a few steps now!

However, buying and selling digital ads wasn’t always as easy as it is today. In the past, advertisers had to do all the work manually and contact websites directly to buy their ad inventory. Today, this has changed with the help of demand-side platforms (DSPs) and supply-side platforms (SSPs). The process is now efficient and instantaneous, enabling advertisers to save time and manage their campaigns.

Demand-side platforms especially help companies reach their target audience, regardless of the platform or device they’re using. They also make it easier to understand how consumers interact with ads before they make a purchase. All of this is useful for advertisers who want to predict consumers’ behavior in the future.

We know it can be difficult to understand how DSPs work and their benefits. That is why we will focus on the basics of demand-side platforms and help you learn the ropes!

Let’s start from the beginning first.

What Is a Demand-Side Platform (DSP)?

A demand-side platform (DSP) is software used by advertisers to manage, buy, and optimize ad inventory from multiple ad exchanges through one interface. These platforms allow advertisers to purchase display, video, and audio ads and manage them across many networks. Ad spaces are purchased on an impression-by-impression basis via supply-side platforms and ad exchanges via real-time bidding (RTB).

Demand-side platforms enable advertisers to place their real-time bids on ad inventories based on various predetermined criteria such as pricing, audience segments, and other data. By leveraging this technology, advertisers can manage their bids and the pricing for the data.

What’s more, DSPs incorporate many of the characteristics that advertising networks offer. For instance, there is access to inventory and targeting, as well as the ability to serve ads and send bids. All of this is stored on one interface which means advertisers can control and maximize the impact of their ads.

What Are the Benefits of Using a Demand-Side Platform?

DSPs are useful because they provide advertisers with the necessary tools and data to create a more targeted campaign. As a result, their efforts will be more efficient and productive in the long run.

Furthermore, demand-side platforms offer a much needed organization and convenience to all advertisers who want to manage their campaigns on an extremely competitive and ever-changing market.

On top of making the ad buying process easier, using them is beneficial for advertisers in many ways:

  • Automation — Online advertising involves various processes such as retargeting, launching ads, downloading reports, and others. With the development of DSPs, most of these processes have become automated, requiring only a few clicks to get activated. 
  • Global reach and integration — Some DSPs provide access to premium ad inventory. They usually connect with global ad exchanges or partner up with local publishers to make this inventory available. Also, these platforms enable advertisers to bid on inventory from the whole world.
  • Advanced targeting — Aside from giving you global reach, DSPs also allow you to deliver relevant messages to your audience thanks to advanced targeting capabilities. These platforms can target according to gender, interests, language, geolocation, device, and other. Better targeting means more personalized ads which may convert new customers.
  • Right Inventory — The inventory choice can make or break the success of your advertising campaigns. Since DSPs allow advertisers to predefine the type of inventory they want to purchase, it’s easier to reach success. Perhaps you want to purchase in-app ads to increase engagement. You just need to choose this inventory and DSPs will do the rest.
  • Detailed Reporting — Having access to in-depth data is important if you want to improve your advertising efforts. DSPs allow advertisers to track the performance of their ad campaigns in real time. In most cases, they offer reporting on website traffic, page view, click-through rate, and more.
  • Support — Lastly, demand-side platforms often offer support which is pretty useful for all those who are just starting to use this technology to buy ad inventory.

As you can see from everything mentioned above, demand-side platforms are helpful tools. These benefits show that there’s a good reason why they’ve become an essential part of advertiser’s life. Together with supply-side platforms, DSPs have improved the programmatic advertising ecosystem.

Just in case, we’ll also go over programmatic advertising and its two important processes to better understand demand-side platforms.

What Is Programmatic Advertising?

Programmatic advertising is the process of buying and selling digital ads with the help of software, as opposed to the traditional process that involved human negotiations and manual insertion orders. Additionally, this technology publishes purchased ads contextually based on complex and sophisticated algorithms.

Why does programmatic advertising matter in today’s advertising world? Easy — because of efficiency. Before programmatic ad buying emerged, digital ads were bought and sold by human buyers and salespeople. However, this proved to be expensive and unreliable. Programmatic advertising technology has made the online ad buying system more efficient and cheaper by adding machines that go through this process automatically.

There are two types of programmatic advertising.

Types of Programmatic Advertising

As you know, programmatic advertising doesn’t need to involve advertisers and publishers working together to serve and buy ads. Most online advertising is done programmatically nowadays and there are two types of programmatic deals you should know of.

Let’s check them out below.

Real-Time Bidding (RTB)

Real-time bidding (RTB) refers to the buying and selling of digital ad impressions through real-time auctions. With RTB, advertisers can specify their target audience and how much they’re willing to spend. Then, competitive bidding takes place between advertisers who are trying to buy the ad space.

Furthermore, as an ad impression loads in a browser, all information about the page it is on and the user who’s viewing it is sent to an ad exchange like Google ADX. This platform auctions the impression off to the advertiser who’s ready to pay the highest possible price for it. The winning ad is then loaded into the page.

Advertisers typically use demand-side platforms as they can help them decide which ad impressions to buy and how much to bid on them based on different factors, including the websites they appear on and user behavior.

Programmatic Direct

Programmatic direct differs from real-time bidding in that it allows advertisers to purchase guaranteed ad impressions from specific publisher websites. So, there’s no auction here, but advertisers rely on programmatic direct to buy guaranteed ad placements in premium locations.

For instance, major publishers will often decide to sell their digital ad space via programmatic direct deals. They collect all details about their visitors and provide these to advertisers. Based on those details, advertisers can determine whether this is the audience they want to target.

Now that we know the basics of programmatic advertising, it’s time to go back to demand-side platforms!

How Does a Demand-Side Platform Work?

As we’ve learned by now, a demand-side platform is an advanced solution that enables advertisers to purchase ads in an automated fashion. Everything they need can be found on one interface that tells them which ad impressions they should bid on and how much they need to be prepared to spend to be featured on a particular website.

All of this happens thanks to a process which is highly technical. However, in layman’s terms, DSPs enable advertisers to buy impressions from various publisher websites. These impressions are targeted to specific users thanks to the fact that the platforms have insight into their location and browsing behavior. But how to demand-side platforms get all of those impressions?

It is publishers who list their available ad impressions on marketplaces called ad exchanges. DSPs examine every impression and decide which one is suitable for a specific advertiser. After selecting the right ad impressions, it is time to bid for them. Usually their price is determined by a real-time auction, i.e. the process called real-time bidding. So, there’s no need for a middleman who will negotiate prices with buyers. The impressions go to the highest bidders through DSPs. This process lasts for a few milliseconds — the time a user’s computer needs to load a webpage.

In the past, media buyers had to manage their ad campaigns from various sources such as Google, Facebook, and Twitter, and follow them in different dashboards. Demand-side platforms consolidate campaigns from different channels into one interface.

Thanks to developments in technology, advertisers and publishers really have it way easier now than before!

What Are the Main Components of a Demand-Side Platform?

A demand-side platform is an intricate system. It consists of numerous elements which ensure it runs smoothly, helping advertisers buy ad space and manage their campaigns. If you want to understand DSPs better, take a look at its main components!

Bidder

Given its purpose, the bidding process is one of the key elements of a demand-side platform. This process is managed by a component known as “bidder” whose task is to place bids on inventory as real-time bidding takes place.

Ad Server

An ad server stores information about ads and delivers this content to various platforms, websites, and mobile apps. It is able to display ads in the right place and to the right audience.

Campaign Tracker

Advertisers know how important it is to assess the performance of a particular campaign. Luckily, a demand-side platform has a component that helps professionals measure the success of their advertising efforts. Campaign tracker gives you insight into impressions, spends, clicks, and more.

Reporting Database

Once a campaign tracker records all the necessary data, it sends it over to the reporting database. A DSP user can generate reports by examining this information.

User Data

This component of a demand-side platform processes and stores crucial information about a specific user. User data includes their buying habits, interests, location, age group, and other. Marketers can use this information to bring changes to their campaigns and produce better results.

User Interface

User interface refers to the dashboard where advertisers work on creating, managing, and optimizing their campaigns.

Banker

It is highly likely that advertisers may go over their budget while using a demand-side platform. During RTB, it’s easy to overspend because of the number of bids occurring in real-time. However, a banker is there to avoid campaign overspending.

Final Thoughts

Learning the ropes of programmatic advertising might seem daunting at first. But we hope our article helped you understand demand-side platforms better and why they are so beneficial for advertisers. If you want to manage your ad buying process from one interface, we suggest you find one DSPs and start your journey!

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