What is a Demand-Side Platform and How Does It Work?

Demand-side platforms have shifted the way we manage advertisements today. New advancements in the ad tech allow businesses to publish their content almost instantly, skipping the once-necessary steps such as manual insertions orders, meetings, contracts, etc. Ad buying and selling have become extremely approachable, but there’s a lot more to it.

What is a DSP and how does it work?

DSP Explained

A demand-side platform is automated software that purchases ads, to put it in a nutshell. It grants advertisers access to multiple ad networks where they can buy various media and ads in real-time. This is done within seconds, unlike traditional marketing methods, which makes the whole process more profitable.

Before advertising became automated, digital ads were processed manually, which wasn’t only time-efficient but also cost more money. DSP allowed media buyers and salespeople to make it much cheaper by cutting the entire negotiations stage, and highly accurate thanks to the data such platforms store.

DSPs store real-time data from several sources. Media buyers can then learn about users and target audience more relevantly. The platform combines both online and offline data which allows advertisers to create segments based on demography, interests, behavior, affinity. This is extremely accurate and helps to publish better ads.

Purchasing and managing advertising inventory is done by automated tools which bid on them. This is called RTB (real-time bidding) and DSPs are used for programmatic advertising process. Its goal is to buy impressions that will be most suitable for the target audience at a minimum price. The targeting options are usually very accurate, which is highly appreciated by advertisers as it reduces the wastage.

The Main Components of a DSP

Although no two demand-side platforms are the same, there are elements that they all share. It may seem they are just used to buy and sell ads, but their complexity goes much deeper. Each component is of great importance and altogether make for the success of a DSP. Let’s have a look at them.

  • Integrations – DSPs need to integrate with various other platforms to be more efficient. This includes SSPs and DMPs.
  • Bidder – it targets data located on various platforms and places bids on them usually within less than 200 ms.
  • Ad Server – no DSP can exist without it. Ad servers are responsible for storing data and displaying it to the end user.
  • Campaign Tracker – campaigns performance have to be tracked in order to be able to improve them in the future. Such data is sent to the reporting database.
  • Banker  – it controls the amount of money spent on ads during real-time bidding and ensures limits are not exceeded.
  • Reporting Database – it generates reports based on the data received from the campaign tracker and sends it further to the user interface.
  • User Profile Database – it stores data about users and helps to segment them based on specific factors such as age, demography, behavior, etc.
  • User Interface – advertisers use it to manage their ads and access reports.

How Does a DSP Work?

The new generation of DSPs has made advertisers’ lives much easier than before. They can target audience in a more efficient and relevant manner thanks to its multidimensional approach. Yes, DSPs are connected to various channels allowing media buyers to cut down the effort they used to put into a successful ad campaign. Here’s a simple example of how a DSP platform works from a user’s point of view.

When someone is searching for ‘cheap flights to Colombia’ on Google or any other search engine, a DSP collects such data and stores it along with other information about the user. Advertisers can then use this knowledge to target audience presenting them with relevant content. We all have seen it on various platforms and sites. So if a user was recently looking for ‘cheap flights to Colombia’, he’s likely to see ads about packaged trips to Colombia, hotel deals, insurance, etc.

The old-fashioned way meant managing ads on every platform individually, which involved separate efforts on Google, Facebook, Instagram and so on. DSPs provide advertisers with all the information they need cutting down the effort, time and cost as everything is stored and can be managed from one single place.

Specialists at ActiveRevenue explain this process and it can be demonstrated as follows:

A user is visiting a website. His virtual profile is already stored and includes age, gender, interests and everything else that can be learned from his online behavior. The website he’s just accessed sends an ad request to the SSP, and then to an ad exchange in the next step. This is where a DSP gets a request from. Being notified that there’s an impression to sell, a DSP starts real-time bidding. Once the sale is completed, the user is being presented with an ad that’s highly relevant to his virtual profile. The whole process takes about 100 ms and is repeated every time a user accesses a website or refreshes it.

Benefits of Using a Demand-Side Platform

Using a DSP is full of advantages for both advertisers as they’re able to target their audience better, and users when they’re displayed content that is relevant to their virtual profile. Here’s a list of major pros of using a DSP:

  • It improves efficiency allowing media buyers to work across multiple platforms.
  • Third-party data providers give them access to all the information advertisers may need.
  • Targeting and retargeting is improved, which allows advertisers to create personalized ad campaigns and this directly translates to better engagement and may result in a conversion.
  • DSPs serve as chests of knowledge and granting media buyers access to various reports make it so much easier for them to improve their future advertisements. They can blacklist certain websites and audiences, setting various limits on ads, retarget, etc.
  • DSPs can also help to manage the budget better, which is crucial in a real-time bidding process.

Conclusion

There’s no doubt utilizing demand-side platforms is convenient. Advertisers can take advantage of the potentially endless possibilities and create ads that will perform better and actually convert. Nobody likes to be presented with irrelevant ads, therefore investing in DSPs should be of high importance for media buyers in order to improve the user experience with ‘demanded’ content.

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