What Is A DSP: Best of Epom's Explanations in a Single Release

“White-label vs self-serve DSP,” “How to Choose a DSP,” “DSP vs Ad Server” – being the superstar of programmatic advertising, demand-side platforms appear in every second article of this blog. Despite that, a DSP rarely gets its solo spotlight…

Today, we’re here to fix that. In this article, you’ll not only get the extensive answer to “What is a DSP?” but also a compilation of every DSP aspect we’ve covered so far on this resource. Get ready for a truly informative article!

What Is a DSP?

A demand-side platform, or DSP, is an ad tech platform made for buying ad traffic programmatically, as well as creating, managing, and optimizing advertising campaigns.

To put it simply, it’s a platform for the demand side of programmatic advertising: advertisers, ad agencies, and, partly, ad networks. These ad tech businesses use a DSP to access programmatic auctions and buy ad placements for a preferable price.

But that’s quite a limited description of what a DSP is and what it can do. In fact, modern demand-side platforms are incredibly light, fast, and easy to use. They are packed with features (later on that) to make your ad-buying experience as effective and pleasant as possible.

What Is DSP Programmatic Advertising?

As stated, a DSP is an obligatory advertiser’s tool, if they want to surf the waves of programmatic. But what’s that exactly?

Programmatic advertising is a method of buying, selling, and optimizing digital ads automatically via specific tools and algorithms.

Think of it as a way to buy ad placements that relies on automated bidding in real time. Thus, the name of the protocol that makes the whole thing go is real-time bidding or RTB.

It all sounds a bit too complex, but trust us, it’s not. Programmatic advertising includes several auction types, but most deals happen at so-called open auctions. Just like in real life, you (advertiser) place bids on ad slots (that belong to publishers), and the highest bidder wins, getting the ad placement. The only two differences are:

• Unlike real-life auctions that can last from minutes to hours, a programmatic deal happens in about under 100 milliseconds while the website is loading;
• Instead of sitting in a room with hungry-for-purchase people and raising your hand to up the stakes, you simply use your DSP to set up parameters of the ad placement you want and how much you are willing to pay for it. The DSP acts as your representative and automatically participates in an auction.

Before we move on to what is a DSP’s exact role in the programmatic auction process, there are two important things to note about this media buying type:

1. Don’t confuse programmatic with direct media buying. The latter is done via ad servers; the main difference is that the deals happen “manually.” The advertiser and publisher negotiate the exact price of an ad placement and where it is *khem* placed…
2. The auction is automatic. This is cool and fast but has its peculiarities. For example, no party has control over where the ad will be placed exactly. That’s why the main focus of programmatic is the audience characteristics (targeting, data) and ad properties (ad format, price), not its location.

DSP & Programmatic Tech Stack: SSP, Ad Exchange

DSP is tightly integrated with the programmatic ecosystem, making it next to impossible to take part in an RTB auction without this ad tech piece. But a demand-side platform isn’t the only hero of the programmatic crew. Meet the rest of the clique and explore how a DSP differs from each.

SSP

Let’s start with a straightforward DSP vs SSP comparison.

If the demand-side platform is an ad tech platform made for programmatic media buying, then:

A supply-side platform is an ad tech platform made for programmatic media selling.

Demand – supply, it’s that simple. Naturally, an SSP isn’t limited to just selling ad inventory. Like a DSP, It’s also a multi-functional tool that can optimize a publisher’s earnings, ad views, and fill rates.

We already have a detailed comparison of an SSP vs DSP, but here are just some basic differences you should know about:

What is DSP:

• Used for buying ad placements and campaign management;
• Used by the demand side (advertisers, ad agencies, ad networks) of programmatic advertising;
• Allows the users to connect to ad exchanges with multiple SSPs;

What is SSP:

• Used for selling ad placements and inventory management;
• Used by the supply side(publishers, ad networks) of programmatic advertising;
• Allows the users to connect to ad exchanges with multiple DSPs;

Ad Exchange

An ad exchange is a digital marketplace in programmatic auctions.

Simply put, an ad exchange is a place where the publisher sells their ad inventory with a supply-side platform, and the advertiser buys it with their demand-side platform.

Think of it as an independent intermediary between both supply and demand parties. Or if we simplify this even further, an ad exchange is the eBay of programmatic digital advertising.

Many people confuse ad exchanges with ad networks and agencies, but this comparison is far from rational. Just like a DSP and SSP, an ad exchange is cold-hearted machine software that does what you ask it to, rather than a business partner that helps you with advertising.

Before we move on, it’s important to note there are different types of deals in programmatic. The ad exchange is what allows to set them up:

• Open programmatic auction

The most popular, common, and discussed programmatic deal up to this point is, of course, the open auction. Don’t worry; we’ll discuss how every screw and bolt of the process runs a few paragraphs later.

Advertisers use their DSPs to connect to ad exchanges with dozens of SSPs. They set the parameters of ads they want to buy along with the price they’re willing to pay, and the DSP does its thing. Namely, upon receiving the SSP requests, the DSPs participate in a free-to-enter auction for the ad placement, and the advertiser whose DSP has the highest bid set – wins. Any DSP can enter.

• Private marketplace

Think of a private marketplace or PMP as an introverted brother of an open programmatic auction. Sure, it’s less popular, but it has its use, especially if you, as a major publisher, have a list of preferred reliable advertisers.

Basically, the process of ad buying is the same. The only difference is that only a selected few advertisers get an invite before the auction happens. Once the DSPs are there, the auction goes as usual.

• Direct deal

A direct deal isn’t an auction-based process. The advertiser and publisher negotiate the price for each ad placement, just like with direct media buying, but there is a nuance.

Instead of using an ad server (like all normal people in direct do), the parties use the programmatic tech stack discussed above. The advertiser buys and optimizes their campaign with a DSP, the publisher sells with an SSP. It’s not hard to figure out the logic behind: if you buy ads directly once in a blue moon, there’s no point in investing into an ad server.

How Does DSP Work in Programmatic Auction?

Now that you finally know every component of the ad tech stack and how DSP interacts with it, let’s cement your knowledge by explaining how a programmatic auction works and what is DSP’s role in the process.

We do this in almost every programmatic-related article, but it’s like a multiplication table – it never hurts to remember.

Let’s assume that you’re an advertiser who wants to buy a Large Skyscraper ad placement and are willing to bid up to $ 5 CPM per one. Assuming that your DSP is already connected to an ad exchange, the open auction will go like this:

1. The user clicks on the site, and the real-time bidding auction starts.
2. The site sends an ad request to an SSP if there’s a chance to show an ad.
3. The SSP collects the user’s data and analyzes if there’s suitable ad space for a Large Skyscraper ad. Luckily for you, there is!
4. The ad exchange helps to give this data to DSPs who want to place in this ad slot.
5. Based on the pre-set targeting options, the DSPs bid on impressions.
6. You are not alone. There are three advertisers (you included) that have CPMs of $4.20, $4.70, and $5.00; the auction begins.
7. The ad exchange has determined the third to be the highest CPM. Congratulations—that’s your bid! Now, you have an ad placement on the publisher’s website.

What Is DSP’s Marketing Value for You?

Okay, DSP is a great tool and all, but it obviously requires some understanding of ad tech and programmatic to be used to its full potential. Otherwise, it’s just a piece of software with a ton of text that might as well be written in Japanese. Why not just call your local media buying agency, or even better, make a deal with the devil an ad network and call it a day?

Well, here are some reasons that may or may not persuade you to learn the ways of programmatic ad buying yourself and use the DSP as your advertiser’s sword.

• Transparency

It’s kind of obvious that when you take matters into your own hands, you get much more transparency and freedom with your business. And this isn’t a metaphor, a DSP beats outsourcing your advertising in almost every feature from the variety of ad formats to the amount of targeting options you can set.

• Simplicity

SSPs, DSPs, RTBs – ad tech has a bunch of acronyms that make it seem like rocket science, trust us, it’s not. Yeah, the nuance behind finding the right DSP, setting up the right audience characteristics, and finding the hundredth thing that goes wrong is truly immeasurable, but it’s learning, and making mistakes while learning is fine. You can do it!

• Affordability

Using a fishing rod is almost always more affordable than buying fish on the market; that’s how businesses work. However, if you ask, “What is a DSP in digital marketing?” we’ll answer, “Definitely, not charity.” And that’s the next stop in our ride.

What Is a True DSP?

Demand-side platforms cost money, and before investing in one, you should know the options. Surely, we can’t give you an example of a true, perfect DSP (unless we are talking about Epom’s DSP). What we can give you is an explanation of how to set up a DSP solution yourself and what features it should have.

What Are DSP Types?

There are many ways to in-house a DSP. We’ve made a detailed comparison several times already, so just to not drag this out any longer, you have:

• In-housing

You own the DSP platform + own the team. Expensive for most of us (if you’re not the Amazon or Google), but gives vast opportunities.

• Outsourcing

You leave every advertising aspect to a third party. It’s not a bad decision in concept, but just take all the benefits of a DSP from the previous heading and reverse them to shortcomings. Now you get it.

• Hybrid

You own the team + subscribe to a technology. This is the most popular and thought-out option, but another divide comes here. A third-party DSP can be self-served or white-labeled.

A self-serve solution is your general idea of a DSP. The platform is essentially free, but you pay A LARGE markup for every ad placement. Moreover, you don’t have much in terms of tailor-made features and customization.

A white-label solution is what an in-house DSP would look like if someone made it for you and gave you full access to technology. This solution allows you to rule the platform as it is your own, order personalized development, and change whatever you want. Naturally, the tech isn’t free, but you still save more in the long run since the markup is lower.

The choice is not axiomatic. A self-serve solution is cool for ad tech rookies who just want to familiarize themselves with the DSP without investing much time and finance. On the contrary, a white-label DSP is made for those who want committed ad tech relationships with long-term rewards and scale.

How to Choose the Right DSP?

Now, for the features. Again, there is no strict book on “What Is a True DSP,” but there are features, the absence of which is sacrilege in our ad tech world. When choosing a DSP, look for:

• Frequency capping

Frequency capping is when you put the number of times you want the user to see your ads on the screen for a set period of time. Almost every DSP these days has one, so beware of the ones that don’t.

• Various ad formats

The variety of ad formats is the key to buying the perfect ad placement. Native, video, rich media — if your DSP doesn’t support the basics, skip it.

• Bidding rules

Algorithms that automate the process of media buying and make it even more profitable – time to sign up! Seriously though, multiplying the bid based on your set priorities simplifies the whole advertiser’s business significantly.

• Vast supply

The more supply – the better the offers, this one is quite straightforward. Before applying for a DSP, discover what ad exchange & SSPs it has connected to. How many are enough? Well, quality over quantity, but a general marker of 30 is okay.

• Roles & Permissions

Security is a strong concern these days, but how do you protect your own software from malicious intent within? Admin account does just that by limiting the features other account holders can use + it becomes a must for an ad network.

Which DSP Should You Get?

As we said, there is no perfect DSP. The number of variables in the DSP equation is hard to comprehend, but we hope that this guide made it just a little easier.

However, if you’re still striving for a definitive choice, we’d recommend a hybrid setup with a white-label solution. There are plenty of contenders, but you can look no further than Epom’s WL DSP. All of the features mentioned above + a support team + custom development = one of the best DSPs.

FAQ

• What is Amazon DSP?

  Amazon has launched a powerful hype train with its new DSP, and we can’t wait to try it out and compare it to the other contenders. For now, the reviews are mixed, some say it’s the second coming of the ad tech world, some say it’s lame and lacks features.

• What is the difference between a DSP and an ad server?

  The first is used for programmatic ad buying; the second is for direct ad buying and selling. Ad servers are an older technology, but not one step less advanced.

• What is a DSP example?

  The market is saturated with DSP solutions, and we even made our top five. If you don’t care enough to scroll through it, here are just some good contenders: Bidmind, Eskimi, Adform, Adlib.