A demand-side platform (DSP) is an automated buying platform where advertisers go to purchase banner ads on websites, mobile ads on apps and the mobile web, and in-stream video.

DSPs leverage automation to save advertisers time, money, and hassle in the selection and setup of their digital advertising. 

It uses software in place of human employees and negotiations in ad purchasing.

DSPs sell impressions to advertisers. An impression is when a single browser on the website clicks on a single ad from one ad network.

These impressions are then targeted to users on the basis of their location, their interests, and other individualized criteria to heighten the potential effectiveness of a given ad and secure more business from advertisers.

These impressions are made available to advertisers through digital ad exchanges, where DSPs automatically decide in a matter of milliseconds which impressions will be most effective for an advertiser to purchase.

The purchase is then automatically executed by the DSP on behalf of the advertiser in a process known as real-time bidding (RTB), in which the impression is sold to the highest bidder (the max CPM price the advertiser of the matched campaign is willing to pay $5, $8, $6) on the exchange within milliseconds as the webpage hosting the impressions is loading. 

A DSP is the flip side of a supply-side platform (SSP) which is a technological platform that represents the interests of the publisher and sells advertising inventory.

The Advantages of Demand-Side Advertising Platforms

DSPs were designed to minimize the need for negotiations between the advertiser and publishers, making the process cheaper and more efficient through automation.

With the appearance of DSPs, the need for manual deal negotiation has completely vanished.

Buying ad space in real-time through DSPs gives advertisers the opportunity to run ad campaigns to the target audience at the right time, screen, and ad format.

The power of the DSP is in its ability to automate the decision-making process: decide which impression to bid on and calculate the maximum value of each impression.

During the “real time bidding” auction, the system sorts off impressions and defines the highest bidder. The winning bidder pays the price determined by the second-price auction: not the actual highest price but the second-highest bid offered, plus $0.01.

That’s how the fair price defined by this mechanism prevents the advertiser from overpaying.

The Effectiveness of Demand-Side Advertising Platforms

Global Reach

Almost all DSPs give access to a range of inventory worldwide on desktop and mobile screens and allow media buying in multiple currencies.

Effective Targeting

The demand-side platform definition would be incomplete without targeting. Precisely, this function utilizes the user data to make the message as relevant as possible to the viewers.

DSPs can target:

– According to the geolocation, county, city, time zone

– According to gender, marital status, income, level of education, language, interests

– According to the device (desktop, mobile, tablet)

– Options such as frequency capping (how often the same ad appears in front of the same user) and dayparting (which part of the day) make advertising even more individualized.

Right Inventory and Brand Safety

The first thing that determines the success of RTB campaigns is the inventory choice. Since the DSP platform allows for pre-defining the type of inventory for purchasing, it’s easier to aim for success.

For instance, in-app ads typically have higher engagement rates than mobile or desktop. Knowing that, the brand that strives to raise engagement can choose to serve impressions only in apps.

As for brand safety, adding some of the applications to the whitelist, the advertiser can shorten the inventory selection period, immediately posting on the websites with the highest performance.

The blacklist, on the contrary, can eliminate the inefficient inventory or block fraudulent or potentially harmful sources for the safety of your brand’s image.

Reporting and Campaign Analytics

Demand-side platforms allow advertisers to track the performance of their ad campaigns in real-time. Most DSPs offer granular statistical reporting on click-through rate, website traffic, page view, engagement rates, and more.

Regardless of the fact that the ad campaign runs across different ad exchanges at the same time, a DSP gathers information from all sources. After this, it delivers it as a consolidated custom report. Reporting helps to see what works and what doesn’t and  defines a strategy for future campaigns more effectively.

Minimal Budget

DSP advertising allows small and medium brands to launch and customize their advertising campaigns. This move reduces the extra costs typically consumed by third-party service providers. Most DSPs make it possible to start a campaign having a couple of hundred dollars on personal balance.

It’s worth noticing that every demand-side platform has its own pricing model. CPM (cost per thousand) is one of the most widespread of them. In such a model, the payment is counted per thousand impressions.

Since the DSP platform is bidding each time on a different impression, the payment is distributed evenly, after each impression served, not 1,000 impressions at once. The auctions run according to the second-price auction. The winning bidder pays the second-highest bid for inventory plus $0.01 (not the actual highest winning price).

DSPs and SSPs are ushering in a new era of cost saving for advertisers, revenue optimization for publishers, and heightened speed and convenience for both. 

Real-time bidding eliminates the need for human salespeople on the publisher end and cost negotiators on the side of advertisers.  This allows both parties to reach their goals in an elegantly streamlined way.

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