What is a DSP?
This is a continuation of our Digital 101 series that starts with an overview of digital advertising and goes through the nature of RTB advertising.
A Demand-Side Platform (DSP) is software that facilitates the automated buying of advertising. When an advertiser wants to get their ads up across the web, they use DSPs to buy the inventory (spaces websites sell for ad placements).
It’s a little more complicated than that, but those are the broad strokes. To understand the purpose of DSPs and the role they play, you need to know a little more about the digital advertising ecosystem.
Where DSPs Live in the Digital Ecosystem
You have to give LUMAscape credit for distilling down this entire ecosystem into one graphic, but it’s way too tough to read. In our article A Beginner’s Guide to Advertising, we have a simplified view of the digital advertising ecosystem that’s a little easier to digest.
This is a good place to start for understanding DSPs, who they work with and what they do. We’ll start from the left. A brand wants to advertise, so they hire an agency to create a campaign along with a plan for getting that campaign in front of people.
The agency works with a trading desk (which can sometimes be departments within agencies) to buy inventory from DSPs. This inventory has been packaged by DSPs from across many ad exchanges, allowing the campaign to go live in real-time anywhere the campaign needs it to.
From there, DSPs provide data on what’s happening in the campaign and can be used to optimize performance as it develops.
To package inventory better, DSPs developed robust targeting capabilities. When you buy inventory through them, you know who and how many you’re reaching. To augment these targeting capabilities, DSPs often partner with third parties:
- Retargeting Technology
- Creative Optimization Tools
- Data Management Platforms (DMPs)
- Tag Management Tools
- Attribution Technology
As arbitrators between trading desks and ad exchanges, DSPs are one of the central points of the buy-side. In recent years, though, the lines between these three have become blurred. To find out why, we need to explore the history and role of DSPs.
The Role of DSPs
Before real-time bidding, ad inventory was bought and sold in person. By human beings. Over business lunches and stuff.
As you can imagine, this was inefficient, costly and prone to error. When Right Media (the first ad exchange as we think of them today) hit the stage, they turned that model on its head. Automated real-time buying of advertising inventory was now possible.
But navigating many ad exchanges to buy the right inventory was a huge, complicated task. DSPs rose to prominence by packaging inventory across these ad exchanges and simplifying the buying process. In doing so, they’ve become a bedrock of the ecosystem.
Their role now is to replace the people who used to manage the buying of advertising inventory. They help advertisers, agencies and trading desks sort through the constellation of digital advertising inventory and buy what they need.
The Future of DSPs
The lines between DSPs and ad exchanges are starting to blur.
As DSPs expand their capabilities, they start to overlap with the functionality behind ad exchanges. And most ad exchanges now have some sort of DSP-like functionality as well. This blurring will likely continue, if not speed up in coming years.
Walled gardens will threaten independence.
Facebook and Google (and soon to be Amazon) have closed ecosystems (a.k.a. walled gardens) that have taken over most of digital advertising. The strength of independent DSPs is being able to move between and throughout all ad exchanges. As competition heats up between these walled gardens, it will become harder and harder for independent DSPs to survive.
Direct brand relationships will rise.
As DSPs become easier to use, they’ll start to become more attractive for brands to work with. That means potentially cutting out agencies and trading desks. We find most brands want a closer relationship with their data, which is something DSPs can provide. As part of the recent in-housing trend, this development opens up a can of worms for the future of the whole buy-side of the ecosystem.
They’ll increase complexity.
While DSPs serve an essential function in the digital advertising ecosystem, they’re unwieldy and tough to manage. Managing a campaign often requires hopping from platform to platform and many campaigns can require the use of multiple DSPs. And DSPs are not motivated to work well together. So as the in-housing trend heats up, a different solution is needed to help advertisers manage their campaigns.
LumenAd is one such solution. It’s a platform that allows advertisers to plan campaigns, connect all data (no matter where it’s from), monitor and optimize in real-time, and craft custom reports — all from one central place.
Subscribe below to learn more about the digital advertising ecosystem, or schedule a demo today and see how LumenAd can revolutionize your organizations digital advertising.
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