Demand Side Platform (DSP): What Is It and How Does It Work?

Demand Side Platform (DSP): What Is It and How Does It Work?

7 Min Read

As the advertising world continues to evolve, technology does as well, and sometimes it’s hard to keep it all straight. Programmatic advertising and the tools that go along with it, like demand side platforms, have made it easier than ever for advertisers to access ad inventory across publishers and reach their target audience.

But, what is a demand side platform and how does it work?

What Is a Demand Side Platform?

A Demand Side Platform (DSP) is a software-based platform that allows advertisers and agencies to buy digital ad inventory from multiple ad exchanges in an automated, centralized, and efficient manner using real-time bidding technology.

What Is the Difference Between DSP and SSP?

SSP stands for Supply Side Platform and is the other side of the transaction when it comes to programmatic ad buying. Where you, the advertiser, use a DSP to plug into the ad exchange and purchase advertising, publishers utilize an SSP in much the same way to make their inventory available to you.

The SSP allows publishers to add their inventory to exchanges and set a floor price, meaning that they can guarantee their inventory is sold for a minimum price that aligns with their business goals.

So while advertisers use a DSP to try to get ads at the best (read: lowest) price for their desired inventory, publishers use SSPs to help ensure that they can sell their inventory at the highest possible price.

The DSP, SSP, and ad exchange work together to find a middle ground that works for all parties involved.

How Does a Demand Side Platform Work?

So again, a DSP automates the process of buying ad inventory across multiple sources, streamlining programmatic advertising for advertisers. Here’s how it typically works:

  • Integration with Ad Exchanges: A DSP connects to various ad exchanges and supply-side platforms (SSPs) to access a wide range of available digital ad inventory from websites, apps, and other digital platforms.
  • Advertiser Campaign Setup: Advertisers set up their campaigns within the DSP, defining budget, targeting criteria (such as demographics, interests, and location), bid strategies, and the creative assets to be used.
  • Audience Targeting: The DSP uses data and algorithms to identify and target specific user segments that match the advertiser’s criteria, ensuring ads are served to the most relevant audience.
  • Real-Time Bidding (RTB): The DSP participates in real-time bidding auctions on behalf of the advertiser, where ad impressions are bought and sold in real-time based on the advertiser’s budget and targeting criteria.
  • Ad Serving: Once a bid is won, the advertiser’s creative is served to the user on the publisher’s site or app. This happens in milliseconds, ensuring that the ad is displayed to the user almost instantaneously.
  • Performance Measurement: The DSP tracks the performance of the campaign in real-time, collecting data on impressions, clicks, conversions, and other key performance indicators (KPIs).
  • Optimization: Based on performance data, the DSP automatically adjusts bidding strategies and targeting criteria to improve campaign performance and ROI. Advertisers can also manually make adjustments based on insights gained from the data.
  • Reporting: The DSP provides detailed reports to the advertiser, offering insights into campaign performance, audience reach, and ROI, helping advertisers make informed decisions for future campaigns.

In essence, a DSP simplifies and optimizes the digital ad-buying process, making it more efficient and effective for advertisers to reach their desired audiences.

Demand Side Platform Benefits

We just covered a lot of information there, so I think a quick summary is in order. Why exactly are DSPs so important to the digital advertising ecosystem? Here are the reasons:

  • Efficiency: DSPs allow advertisers to buy from multiple ad sources through one platform, streamlining the media buying process.
  • Targeting Capabilities: With a DSP, advertisers can leverage data from various sources to target ads more effectively toward specific audience segments.
  • Real-Time Bidding: DSPs provide access to real-time bidding (RTB), a method that allows for real-time decisions on ad placements, enhancing the effectiveness of ad spend.
  • Campaign Optimization: DSPs offer tools for analyzing and optimizing campaigns based on performance data, facilitating better decision-making and improved return on investment.
  • Cost-Effectiveness: By allowing for programmatic buying and precise targeting, DSPs can reduce wasted ad spend and increase the overall efficiency of advertising budgets.

Demand Side Platforms Examples

Now that we’ve answered the question of “what is a DSP,” perhaps you want to check out a few concrete examples. Below is a list of some commonly used services:

  • The Trade Desk
  • MediaMath
  • Adform
  • Roku Oneview
  • Adobe Advertising Cloud DSP

How Do Demand Side Platforms Make Money?

There are a few different ways demand side platforms use to make money:

  • Transaction Fees: DSPs often charge a percentage of the ad spend that advertisers push through their platform, which can also be considered as a technology fee for using the platform’s software and services.
  • Flat Monthly Rate: Some DSPs charge a flat monthly rate for access to their service.
  • Data and Analytics Services: DSPs might offer advanced analytics and data insights as additional services to advertisers, generating income by providing valuable data-driven insights and recommendations.
  • Managed Services: Some DSPs offer managed services where they take over the campaign management for the advertiser, charging for the professional services involved in designing and executing advertising campaigns.
  • Platform Licensing: DSPs may also license their technology to other businesses or agencies for a fee, allowing them to use the platform under their own brand.
  • Premium Features: DSPs can monetize by offering advanced features, such as specific targeting capabilities or integration with certain data providers, for an additional cost.

How Does Performance TV Stack Up?

Now that you are a programmatic expert, you may be wondering how Performance TV with MNTN compares to DSP advertising.

While DSPs help you access CTV and OTT inventory, they are not without their faults, many of which Performance TV addresses.

Pricing: As mentioned above, DSPs make money in a few different ways, including monthly fees or percentages of overall campaign costs. Unfortunately, there are often hidden fees when it comes to accessing various audiences, which can add up quickly. Performance TV is all about price transparency, as well as access to great tools. Included within the cost is access to a creative suite, as well as a customizable reporting dashboard.

Reporting: Speaking of the Performance TV reporting dashboard, this is another efficiency that DSPs do not offer. While DSPs provide essential insight into campaign performance, it is often delivered piecemeal, meaning that you’ll be spending more time deciphering performance rather than optimizing it. With the Performance TV dashboard, all of your campaign data is available in one spot and can be customized for the view that makes the most sense for your business. Plus, your information can be added to your Google Analytics account, making it easy to track your CTV campaign along with your other performance marketing channels.

Ad Quality: There is a lot of content out there and it’s not all created equal. When buying through a DSP, there is a lack of transparency as to what content your ads are actually running on. The content may not be brand safe or your ad may run on skippable inventory meaning your creative is not viewed to completion. Performance TV offers Living Room Quality, which ensures that your ad is only running on non-skippable CTV inventory that runs through your smart TV or CTV-enabled devices (not a phone, tablet or the like). Additionally, it’s served only on top-tier streaming services so you can be sure your ad is showing up only on quality content. 

Set-Up: DSPs often require a third-party, such as an advertising agency or media buyer, which adds more back-and-forth communication, as well as additional cost. Performance TV keeps it simple: upload your creative, select your audience and flight dates and launch your campaign. In the words of one of our favorite TV personalities, how easy is that?

Demand Side Platforms: Final Thoughts

The programmatic world is making it easier than ever for businesses to access available advertising inventory. With the demand side platform definition in hand and an understanding of the technology offerings out there, there is no better time to tap into the world of CTV advertising and reach your target audience where they are watching.

Streaming TV advertising using Performance TV can help alleviate some of the downsides of programmatic buying through a DSP and traditional cable TV advertising methods. The extra data and insights CTV provides will allow you to optimize your campaigns along the way and get more from your budget.

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