Programmatic advertising has skyrocketed in the last year. It’s set to reach $98B by 2021* and will represent 68% of digital advertising spend.
Demand Side Platforms (DSPs) has revolutionized the way online advertising is bought and sold. Let’s break it down: what are DSPs, what do they actually do? Why does my agency or in house marketing team need one to scale? Do I need an additional DSP specific to those highly regulated industries (CBD advertising, online spots betting/casino’s, medical trials, etc.) that I keep turning away?
Why Do Advertising Agencies Keep Talking Demand Side Platforms? What the Heck Are They?
A demand side platform is a digital advertising platform. A DSP is a piece of software used to purchase advertising in an automated fashion. Buyers of ad space (media buyers from advertising agencies or brands) and sellers of ad space (publishers: URL’s or Apps) come together in one ecosystem to fulfill each others needs in real time bidding (RTB). Think of it like programmatic stock buying on NASDK or the DOW. Prices go up or down based on supply and demand. The needs of both buyers and sellers are nearly always met nearly instantaneously.
DSPs are used by marketers, advertising agencies and media buyers. They are used to automate the buying of banner ads, video ads, native, connected tv and even radio ad spaces. Thinking on our stock buying reference, long-gone are the days of waving around a paper stock bid on wall street trading floor while screaming. Long gone are also the days of media buyers placing calls to dozens of publishers to feature a commercial during prime time.
If you have ever bought ad space with Google Ads or through Facebooks Business Manager, you have essentially used a DSP. You simply target your audience through first or third party data, set you budget and campaign times and your ads run. Aside from your A/B testing and ad campaign optimization, you set it and forget it.
Optimization is key for a best return on ad spend (ROAS) but I’m getting ahead of myself, here.
How Does Programmatic Ad Buying Help My Agency Scale?
Historically, digital ads were bought and sold by human ad buyers and salespeople, who are expensive and unreliable. It was like a popularity contest to gain the best ad placement. “Popularity” requires large ad spends, a robust Rolodex of publishers who prioritized your call and a certain reputation in the industry. (Think the hit show Mad Men… big fans around here) It was nearly impossible for a small agency to scale regardless of talent or strategy.
DSPs help make that process cheaper and more efficient by removing humans from parts of the process. Also removed is the need to negotiate ad rates or emailing insertion orders. All of this is done while leveling the playing field for agencies to scale while serving multiple clients.
DSPs traditionally were used as a way to buy remnant (unsold) inventory from publishers. They are now becoming a way of purchasing premium inventory. For newly launched brands, it can be quite a win to have your ads seen in highly esteemed periodicals like RollingStones, Vogue and Fox Sports. This is even more important when buying ad space for a highly regulated industry like we specialize in here at Traffic Roots.
Important reasons for this shift in purchasing methods is due to the numerous advantages DSPs provide media buyers. A few of those benefits:
- Reach a target audience more effectively while identifying a new consumer base as seen in reporting metrics.
- The ability to access a larger amount of available inventory and display ads on a larger number of websites.
- Media buyers can manage and optimize the efficiency of their campaigns by adjusting the settings, or “pulling the levers.” Examples include: blacklisting certain websites & audiences, putting limits on the number of times the same ad is displayed (frequency capping), retargeting across multiple ad placements or only running impulse buy ads during peak buying times.
- The ability to react in real-time to certain outside conditions such as weather, news, stock market activity, allowing the media buyer to serve the most relevant advert to the user.
- The option to integrate 3rd-party data brokers and data management platforms (DMPs) into the DSP to allow media buyers to further optimize their audience targeting capabilities.
How Does Targeting Work In a DSP?
There are a number of ways an advertiser can run targeted ad campaigns with a DSP, but at the heart of it all is data. For example, an advertiser could target users based on the following data:
Behavioral data: Includes information about the user’s behavior and interests, such as the brick and mortar stores they have visited, what products they are interested in, their lifestyle habits, etc.
Contextual data: Includes information about the website or mobile app, such as URL, categories, and the content on the page.
Demographic data: Includes information about the user’s location, age, education, gender, income, nationality, language, lifestyle and so on.
But how does a DSP access these types of information?
Typically, behavioral and demographic data would need to be imported from a third-party data broker or DMP, which would have been collected from a range of online and offline sources. The DSP would sync cookies with the DMP to exchange user data, which can then be used for targeting. The Traffic Roots DMP can publish your custom audience as often as you need it to with refreshed targets (even daily, if the audience requires it) and those audiences are available across your entire client book. Additionally, Traffic Roots is moving out of the cookie space in 2021 for ad targeting without requiring a cookie opt-in; more to come in future articles.
Other types of data, such as contextual data or even user agent data (e.g. browser type, device advertising ID and operating system), are usually passed along during the bid request from the ad exchanges or SSPs. With the Traffic Roots self serve DMP, you can even import your first party data to create lookalike audiences, social and household extensions. You can now publish your custom audience to Facebook Business Manager to stay in front of only the exact audience you choose in Instagram and Facebook.
Audience Insights for Faster Optimization
Big data from DSPs and SSPs is gleaned from user interactions and gives a fair idea of customer behavior. When you learn more about your niche audience, you’re better equipped to respond with advertisements that effectively address user needs. Consumers will always tell you their needs. They will tell you with their time or their money. All you have to do is listen and respond with the appropriate offer.
Got it. But how do they actually work?
Demand-side platforms started to emerge in 2007 when real time bidding began. Back then, most of the inventory purchased was for web browsers in desktops and laptops. DSPs nowadays allows media buyers to purchase inventory programmatically across a range of devices.
A DSP is essentially a middle man, but they are responsible for far more than just the purchasing of available inventory.
Here are some of the main functions DSPs provide media buyers:
- Create, run and manage a number of campaigns simultaneously across multiple SSPs and ad exchanges and control them from a single, centralized user interface.
- Optimize the campaigns to increase ROAS.
- Use 1st and 3rd-party data from DMPs to improve targeting.
- Provide real-time reporting via advanced analytics.
A media buyer sets up their campaigns in a DSP, including targeting and creatives (ads). The DSP then bids on impressions offered by ad exchanges and SSPs. So each time a DSP receives a request (a “call”) from an ad exchange or SSP, telling it that there is an impression available, the DSP analyzes the data about the user. The DSP decides how much this particular user is worth based on their relevance to the media buyer.
Let’s look at this a bit more through the use of an example:
A user, who is about 30 years old and a big sports fan living in New York, accesses a website. The website sends an ad request to the supply-side platform (SSP), which then sends the request to the ad exchange. The ad exchange then tells the DSP that an impression is available on a website and starts the bidding process.
The DSP would evaluate the ad, match it against their data and target parameters, and would bid on the impression based on this information.
Once an impression is sold, it is sent back to the website and is displayed to the user. This process occurs each time a user accesses a website or refreshes the page.
It’s important to note that this bidding process happens within the ad exchange or SSP in real time, hence the name real-time bidding, and takes roughly 100 milliseconds to complete.
More on SSPs and Ad Networks
The short version is that DSPs allow advertisers to buy impressions across a range of publisher sites, but targeted to specific users based on information such as location and browsing behavior. Publishers make their ad impressions available through marketplaces called ad exchanges. DSPs automatically decide which of those impressions make the most sense for an advertiser to buy. The price of those impressions is determined by a real-time auction, through a process known as real-time bidding. That means there’s no need for human salespeople to negotiate prices with buyers. Impressions are simply auctioned off to the highest bidder. That process takes place in milliseconds, as a user’s computer loads a webpage.
DSP Software Features
Ad retargeting — Retargeting allows companies to use an audience pools of those who interacted with their website to tailor campaigns enticing consumers back to their brand. If you have ever checked out a product to then have it haunt you with a percentage off ad, you’ve been retargeted.
Ad Variety — Provide different types of advertising such as native ads, video ads and mobile or cross-device promotions to target broader audiences.
Audience segmentation — Audience segmentation allows media companies to choose whom to target based on multiple types of criteria (demographics, technology platforms used, etc.). For example, an impulse buy with a price point of $100 may be a good fit for $75,000 a year consumers but not so much with a fresh college grad.
Asset management — Manage creative assets to allocate them to each campaign, based on the audience and its characteristics such as region, language, age, and so on.
Bidding — Bidding allows companies to acquire advertising inventory or impressions that are used to place ads on various channels. DSP software usually provides access to multiple sources of inventory. That Billboard on Vogue is going to be a very different price than it will be shown on a mom-blog.
Reporting — Reporting and analytics to track key performance indicators such as effective cost per click (eCPC), and effective cost per mile (eCPM).
Putting it together: DSP DMP SSP
- The visitor lands on a web page and starts browsing content.
- The website publisher automatically communicates the dimensions of available ad space to its SSP.
- The SSP takes a quick look at the visitor to glean as much information as possible about the demography, interests, and net browsing patterns so that an ad relevant to the visitor can be delivered.
- The DSP enters the picture and analyzes the data gathered by the SSP. The DSP evaluates the visitor, gauges the worth of the visitor, and assigns a value to the visitor’s impression based on the DMP audience used for targeting.
- Once the DSP has matched the DMP audience and valued the visitor’s impression, it submits a bid to the SSP that initially provided the visitor data. The trade occurs within seconds in real-time; that’s why it is called Real-time-Bidding (RTB).
- The SSP aggregates all the bids that are flowing in for specific ad space and picks the highest bidder.
- The SSP communicates the winning bid to the DSP which informs the advertiser. The process occurs so fast that the ad is displayed as soon as the web page loads and becomes visible to the visitor. The data is then reflected in live time to the DSPs reporting area so a media buyer can make swift and highly effective optimizes.
Wait, isn’t that what ad networks do?
Yes, to an extent. DSPs incorporate much of what ad networks have previously offered, including access to a wide range of inventory and targeting capabilities. But DSPs say the advantage of using their offerings instead of ad networks is the ability to buy, serve and track ads using one central tool, and to optimize campaigns more easily as a result. It’s all about the data.
Advertisers, media houses, and agencies are continually “demanding” advertising space to showcase content, and the demand-side platform is the technology platform that addresses this demand.
A single platform like Traffic Roots aggregates the publisher-wise inventory of available ad space. Each ad space will be targeting individual users and their behavioral traits, demography, location, and past online activity. So a DSP such as the one offered by Traffic Roots gives you a combination of inventory and audience targeting so you can decide which impression suits your advertising strategy.
Supply-side Platform (SSP)
Publishers or the owners of websites are continually “supplying” ad space or inventory through SSPs. So an SSP is a technology platform that supplies ad inventory to target advertisers on the lookout for digitally automated ad buying.
If both DSPs and SSPs appear confusingly similar, remember that the DSP is used by advertisers to buy ads at optimized costs. The SSP is the publisher’s tool to display and sell ad inventory to achieve the highest cost per 1,000 advertising impressions (CPM).
The DSP CPM Model
I know, you’re swimming in acronyms, but you’re catching on quickly. Let’s chat about that cost per mile the cost per 1,000 ad impressions. This is the cost you are optimizing. The higher the quality of the ad inventory and the higher its efficiency in targeting your niche audience, the steeper the CPM. We encourage you to read more on programmatic ad optimization and the CPM model so you are successful while using the Traffic Roots DSP.
If DSPs are buying ads now, what does that mean for human ad buyers?
It means there will be fewer of them. Publishers are making more of their inventory available through exchanges, and many advertisers would rather purchase ads using DSPs because it’s more cost efficient to do so. However, human input will always be required to help optimize campaigns and formulate ad strategies. It’s at the transactional level that fewer humans will be required.
So DSPs are replacing agencies, then?
According to some, yes. DSPs now frequently work directly with advertiser clients, effectively replacing agencies when it comes to buying media. Clients report that they still look to agencies for strategy and consultancy but are beginning to look to other third parties, including DSPs, to help them actually purchase their ads through in house marketing and advertising teams.
Users are always on the move and access the internet through mobile devices. Any digital marketing campaign worth its money has to factor mobile and social outreach. Multiple platform accessibility is precisely what programmatic advertising delivers.
Adapt to the trend, you zoom ahead; resist the innovation, and you miss the bus.
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