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Demand-Side Platform for Media Buying Explained

Jul 27, 2018  ·  8 min read
Lina Lugova
Lina Lugova, Marketing expert at Epom

What is a demand-side platform? Should you use it? Is it cost-effective to build your own DSP? How to choose a good programmatic advertising platform? You'll find the answers to these and more questions advertisers ask about DSPs inside.

Long gone are the days when a user saw a multitude of irrelevant ads due to the poor targeting options — GEO, age, gender, and basic interests were the only options available. Media buying evolved into audience buying: every business aims at getting the most relevant audience at the lowest price possible.

Due to these changes, buying via third-party ad networks and agencies became risky, as non-transparent deals increased fraudulent traffic.

And that's when Demand-Side Platforms came to the scene.

Contents:

What is a Demand-Side Platform in Programmatic Advertising?

A demand-side platform or a DSP is a piece of software used by advertisers to buy traffic programmatically in different ad formats and from multiple publishers through a single interface in real-time. Instead of randomly putting ads where available, a DSP platform decides which impressions are most valuable for your programmatic ad campaign. This process is automatic. All you do is settings adjustments.

A "What is a DSP?" question usually refers to a self-serve demand-side platform definition, in which you manage your ad campaigns on your own, without involving any ad networks or individuals to handle them for you. In case if you do, such a type of a DSP platform is called a full-service DSP. There is also a white-label DSP in advertising, but we will talk about what it stands for later.

You need a self-serve demand-side platform when you buy a substantial amount of traffic and want total control over bidding, targeting, and creative management. All while tracking the most crucial metrics in real-time and optimizing campaign performance accordingly.

How Does a DSP Work?

If you are new to programmatic media buying and cannot imagine the whole chain, this step-by-step breakdown of how a demand-side platform works will help you better understand the process:

How does a DSP work illustration

Using a supply-side platform, which is a reverse-side platform for supply partners in ad tech, a publisher transfers impressions to ad exchanges. The latter passes it to a DSP, which then evaluates the impression according to the targeting settings, cookie matching, and pricing.

If the impression is valuable (the visitor falls under the advertiser's target audience settings), a demand-side platform will bid on this impression. "Bid on the impression” means that the DSP bids the highest price that the advertiser is ready to pay to show the ad to the chosen audience.

With RTB technology, there's no need to negotiate prices with the publishers, as all of this is done automatically. The auction occurs each time when the inventory matches the creative.

The algorithm of media buying through a DSP is the following. Advertisers place bids, the DSP chooses the highest one among them, and the SSP serves the creative of that advertiser on a selected website. All this process of an ad display with a DSP is done in mere milliseconds.

What are the Key Features of a DSP in Marketing?

DSPs have apparent benefits for marketing and advertising. That's exactly why the share of programmatic media buying ad spend rose by 21% in 2019 compared to 2018 and tends to full adoption in a couple of years.

  1. Transparency. A demand-side platform reveals all the supply-side chain participants are bringing much-needed clarity to the whole programmatic landscape. With the help of the programmatic advertising platform, media buyer will be able to see how his budget trickles down to the publishers' pockets and reallocate their ad spend to the best-performing traffic sources.
  2. Automated KPI Optimization is another valuable feature of the DSP to corner the ad tech market. The vast majority of the DSPs in advertising has developed the automated ad optimization tools like bidding autopilot to cut advertisers' time losses.

    Bidding Autopilot automates ad performance optimization with a system of bidding rules. Based on settings and conditions you choose, bidding rules make automatic changes in your account: they update white/blacklists, bid prices, and more. This tool keeps your budget away from underperforming traffic sources and increases ad campaign performance in no time.

    One of the examples of the demand-side platform with a bidding autopilot feature is Epom DSP.
  3. Queries per second (QPS) is the metric reflecting how many times a DSP gets called to make a bid on an ad placement to reach a user.

    More QPS in a DSP means the higher speed of analyzing and acting on those bids. It's a simple numbers game: the greater the scale of an ad campaign - the higher bidding visibility it will drive. It provides programmatic algorithms with more information.

    After making a bid to reach a unique user at a specific price, the demand-side platform learns if the price was accepted. If the price was not accepted, the DSP is notified that it may require a higher rate to win future bids. However, many DSPs have poor traffic filtering options, which means they can bid on the same publisher's traffic across multiple ad exchanges. The high amount of QPS means duplicate-free impressions.
  4. Real-time analytics. Immediate actions are sewn into a demand-side platform definition. The tool's interface should be as close to real-time as possible since you need the most recent stats to analyze campaign performance and make timely decisions.

    Decide if the "real-time" is crucial for your business and clarify how long is the delay in the analytics feature of DSP providers that you consider. For example, AppNexus have an hour delay in analytics, while Epom DSP has a 1.5-sec delay.
  5. Variety of ad formats. An essential criterion of demand-side platform evaluation for your advertising is the ability to run omnichannel campaigns with non-standard ad formats like popups, popunders, or rich media.

    Since DSPs are incurring high costs on impression processing, they are usually focused on one particular channel (e.g., desktop display) more than others. Define the top 2-3 ad channels that your advertisers need and define which DSP vendors suit your needs best.
  6. Pricing. The cost of using a demand-side platform often depends on the size of a campaign or the media budget you have. Some DSP vendors charge a flat fee while others take a commission on volume.

    Epom Market DSP, which is self-serve, has a bid-markup but is free to use. In the case you are looking for a white-label DSP option, giant DSP providers charge a minimum of $8500 monthly fee + 5% revenue share, so if the pricing plan scares you, consider smaller vendors like Epom. We take only $2000.

    Before partnering with a DSP provider, clarify if there are any additional fees for the DSP's support staff to set up and optimize your campaigns, and also understand if you should pay for the advanced data.

Should I Build My Own DSP?

Even with the rapidly changing digital advertising landscape and enormous competition, there are numerous people on Quora saying: "Want to build something amazing — build it yourself."

This applies to DSP technology, as well. Aside from asking questions like "What is a DSP in ad tech," "What is a DSP meaning in advertising?" or "Could you recommend me a good mobile demand-side platform?", they ask how to build their own DSP platform and if it is worth the hassle.

I identified two issues to take into account BEFORE starting the demand-side platform development process.

Competition Issue

After the rise of header bidding, the number of available impressions increased drastically, and even large DSP and SSP vendors had trouble evaluating and deduplicating them.

Demand-side platforms need to reduce processed ad impressions and pick the most transparent traffic from publishers that could be duplicated across all exchanges.

Newborn DSP platforms have trouble getting exclusive traffic. SSPs usually send all their bids to the bigger DSPs, while those DSPs who spend $5 000- $20 000/mo don't see as many impressions.

The top 5 spending DSPs

High Initial Investments

The main components of a DSP are an RTB bidder, ad server, and data platform. They require large investments and quite rare software development experts to be built.

Be sure to calculate the cost of servers, investments required for building a platform, maintenance costs, etc. If you pay a hefty commission to the demand-side platform provider, it would be reasonable to not think about making your own in-house DSP platform from scratch. And what's even better, to find a quality white-label DSP software solution and buy it.

What is a White Label DSP?

So what does a white-label DSP stand for in advertising? White Label DSP is a technology that can be used as a basis for creating your own demand-side platform. You can customize its look by changing colors, brand identity, and other tailored features. Such a revamp requires minimum capital investment. Therefore, you may concentrate on your marketing goals and advertising campaigns, rather than on developing your own DSP software.

White-label DSP's benefits over a self-serve one are clear. You can connect to multiple SSPs, increase your traffic volume, and optimize your campaigns through a single platform, without bidding several times on the same traffic through multiple DSPs. White Label DSPs in 99% of cases come with total transparency as you control the sources where your traffic is coming from.

Here is the short list of White Label Demand-Side Platforms available on the market:

Evaluate them while keeping the key features in mind. Also, stick to the simple solution that matches your programmatic media buying needs and has no hidden fees.

The reason why demand-side platforms have gained so much popularity is that they allow both ad networks and agencies to get the best advertising opportunities while preserving full control over their budgets.

Disadvantages of Using a Demand-Side Platform

There can't just be rainbows & unicorns. What are the possible issues with a DSP?

Fraud

The main problem here is the DSPs per se but the massive amounts of fraudulent traffic sold by publishers. Bot farms, ad spoofing, and injectors are just a few of the most common ways to falsify traffic.

DSP Consolidation

According to a recent study by Pathmatics, advertisers cut the usage of demand-side platforms from seven to four DSPs per month. As marketers put more focus on reaching the right audience, it becomes difficult to coordinate multiple demand-side platforms.

An average number of DSPs used by US Advertisers

Agencies cut off non-transparent DSPs by a considerable margin while pushing for more transparent and closer relationships with preferred partners.

The right demand-side platform will give you convenience in managing your campaigns amidst a very competitive and ever-changing environment. Knowing what is demand-side platform and how it can help you scale up your programmatic media buying, you'll be able to choose the one that fits your shoes best.

Learned the demand-side platform definition? Let's move further! Read more articles about programmatic to educate yourself or sign-up to try a DSP.

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