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Mobile Tutorial Series – What is a Demand-Side Platform or DSP?

By John Koetsier January 1, 2017

A demand side platform is a tool used to buy media across multiple advertising and data exchanges. A DSP enables an organization to place bids for ad impressions, as well as acquire, ingest, combine and leverage first-and third-party data sources to aid in valuing the audience targeting for each media impression. DSPs can also optimize bidding based upon measures like cost-per -click.

Designed for Audience-Based Programmatic Media Buying

When advertisers buy media directly from publishers, they often are willing to pay a premium for the opportunity to deliver their messages in specific kinds of content. This is called contextual targeting. By contrast, DSPs and exchanges are focused on audience-based digital advertising

Designed for Programmatic Exchange Management

DSPs are primarily used for real time bidding, or purchasing ad impressions just as they are about to be delivered. Real-time bidding is often abbreviated as RTB. DSPs evaluate impressions, place bids, and direct ad servers to deliver campaign creative within the several hundred milliseconds it takes for web pages to load on a user’s browser.

Some publishers prefer to sell inventory direct via exchanges to DSP users so that they can capture more of the margin paid by advertisers for media. By eliminating the ad network middleman, they believe that they make more money. Advertisers using DSPs also believe that they get better pricing without the intervention of a middleman. Other publishers and advertisers prefer to work with networks to simplify the buying and selling processes and benefit from sometimes more sophisticated buying and selling algorithms.

More Pricing and Inventory Transparency

DSPs typically charge a fixed percentage margin on top of the media cost. This gives advertisers greater pricing transparency. With most networks, margins are not transparent. Many publishers list inventory transparently on exchanges so the advertiser knows more about what they are buying. Transparent listing means that the advertiser knows that an impression will appear on a certain site and/or page before they bid. Such inventory generally sells for more money than “blind” inventory, where the website delivering the impression is unknown to the advertiser. In this case, the advertiser knows who will be reached with the impression, but not where.

Demand Side Platforms “Versus” Agency Trading Desks

Trading desks are a service solution, usually provided by ad agencies, to manage the executional aspects of exchange-based media buying. The desks use one or more DSPs to provide the service. Some agencies price trading desk services with a fixed margin, meaning that the advertiser knows exactly how much money the agency is earning with their trading desk service. Others do not reveal their margin, focusing instead on their ability to deliver overall pricing that is better than network pricing.

Available Inventory

Traditionally, exchanges focus on standard advertising units versus customized units — for example, PC display advertising sizes like 728×90, 300×250 and 160×600. But the range of standard sizes available for exchange-based buying with DSPs is growing, and video and mobile advertising are quickly growing in availability. For custom advertising products, including native advertising, advertisers generally still work directly with publishers, though a few startups have emerged to sell such “custom” inventory programmatically as well.

Several years ago, DSPs and exchanges primarily dealt with remnant inventory that publishers couldn’t sell directly for higher prices. Today, however, many publishers sell most or all their inventory via exchanges.

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