Demand Side Platform for media buying explained
What is a demand-side platform (DSP)? Should you use it? Is it cost-effective to build your own DSP? How do you choose a good third-party solution? We've compiled a list of the most common questions advertisers have about DSPs. You'll also learn about how such a platform can help your business.
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.
However, with this evolution, buying via third-party companies became risky: non-transparent deals resulted in the increase of fraudulent traffic. And that's when Demand-Side Platforms came to the scene.
Why you should use a DSP for online advertising
A demand-side platform or DSP is a software used by advertisers to buy traffic programmatically in multiple ad formats, from multiple publishers through a single interface in real-time. Instead of putting ads anywhere, DSPs decide which impressions are most valuable for your campaign. You need a demand-side platform when you buy a decent amount of traffic and want total control over bidding and campaign management, all while tracking the best possible advertising opportunities within one platform.
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:
Through SSP, 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 target audience settings), a DSP would bid on this
"Bid on the impression" means submitting the highest price that the advertiser is ready to pay for showcasing an ad in front of that user. With RTB technology, there's no need to negotiate prices with the publishers, as all of this is done automatically. Among hundreds of DSP bids the impression with the highest bid will be chosen by SSP for ad display. All this process is done in a mere milliseconds.
What are the key features of a DSP?
- Transparency is crucial for your demand-side platform evaluation. Transparency reveals all the supply side chain participants bringing much-needed transparency to the whole programmatic landscape. With the help of DSP, 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.
- Automated KPI Optimization is another valuable feature of DSP to corner the ad tech market. The vast majority of DSP have developed the automated ad optimization technologies eg. 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/black lists, bid prices, and more. This tool keeps your budget away from underperforming traffic sources and increase ad campaign performance in no time.
- 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. A higher QPS represents the speed and frequency 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 decision engines 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 made aware that it may require a higher price 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. High amount of QPS means duplicate-free impressions.
- Real-time analytics. Demand-Side Platform interface should be as close to real time as possible - you need the most recent stats to see the campaign performance. Decide if the "real-time" is crucial for your business and ask DSPs you consider using, how big is the delay in analytics. For example, Appnexus have an hour delay in analytics, while Epom DSP has a 1,5 sec delay.
- Variety of ad formats. A very important criteria of DSP evaluation is the ability to run omnichannel advertising campaigns with non-standard ad formats like popups, popunders, or rich media. Since DSPs are incurring large costs on impression processing, they are usually focused on one particular channel (eg. desktop display) more than others. Define the top 2-3 ad channels that your advertisers need and filter DSPs according to it.
- Pricing. The cost of using a demand-side platform often depends on the size of a campaign, or the media budget you commit to the platform. Some DSPs charge a flat fee while others take commission on volume. The DSP giants charge a minimum of $8500 monthly fee +5% revenue share, so if the pricing plan scares you, consider smaller vendors like White Label DSP. Before partnering with a DSP, 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 by yourself". I found two issues worth taking into account BEFORE starting the DSP development process.
After the rise of header bidding, the amount of available impressions increased drastically and even large DSPs and SSPs had trouble evaluating and deduplicating them. DSPs need to reduce processed ad impressions and pick the most transparent traffic from publishers that could be duplicated across all exchanges. Newborn DSPs 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.
High Initial Investments
The main components of a DSP are as a bidder, ad server and data platform. They require different skill sets and investments. A small competitor research on Crunchbase can show you how much money a DSP raised at its first year of existence. Be sure to calculate the cost of servers, investments required for building a platform, maintenance costs, etc.
If you pay a large commission to the demand-side platform provider, it would be reasonable to not think about building your own in-house DSP platform from scratch, but rather to find an alternative with a White Labeling option.
What is White Label DSP?
White Label DSP means that you can use a fully developed solution, and customize it to your advertising needs: colors, theme, brand identity, and other tailored features. Customization requires minimum capital investment, therefore you may concentrate on your marketing goals and advertising campaigns, rather than on developing your own solution. White Label DSP is bug-free as it has already been tested in real-time. You can connect to multiple SSPs, increase your traffic volume and optimize your campaigns through a single platform, without any intermediaries. 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:
- Epom White Label DSP
- The Trade Desk
Evaluate them while keeping the key features in mind. Also, stick to the solution that is simple, matches
your media buying needs, and has no hidden fees.
The reason why DSPs have gained so much popularity is that they allow both ad networks and agencies to get the best advertising opportunities while keeping full control of their budgets.
There can't just be rainbows & unicorns. What are the possible issues with using DSP?
Fraud. The main problem here is not in the DSPs per se, but in the large 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. Due 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 platforms as it maximizes the possibility of bidding against oneself.
According to Adexchanger, agencies cut off non-transparent DSPs by a huge margin while pushing for more transparent and closer working relationships with preferred partners.
The right demand-side platform will give you the needed organization and convenience in managing your campaign 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.
Want to enhance your media buying with White Label DSP? Drop us a line and we'll be glad to help.