Demand Side Platforms 101

Continuing our adtech 101 series explaining the fundamentals of all things adtech, we move on to consider one of the most important, but arguably least correctly understood, areas of the adtech ecosystem – Demand Side Platforms (DSPs). Most marketers have at best a vague idea; in this article we will explore exactly what constitues a DSP, common features and key platforms available to marketers.

What exactly is a Demand Side Platform?

A DSP is a web-based platform which allows a single point of access to purchase inventory across multiple channels. These channels include purchases from ad exchanges. DSPs can either be standalone, independent entities or they can sit within (and be managed by) agency groups. In this case they are known as Agency Trading Desks. DSPs power programmatic buying, allowing automated purchasing of advertising inventory.

How do DSPs work?

DSPs allow marketers to use the proprietary bidding algorithms built into the platform to perform real-time bidding for inventory based on bidding strategies, parameters and datasets owned by, or made available to, the marketer.
Given that DSPs make use of real-time bidding algorithms, they allow marketers to maximise their campaign budgets by ensuring that each impression (and the associated profile information) passed through the bidstream is analysed and assessed for relevance to the advertiser’s campaign; this allows the maximum bid for that impression to be fixed based upon its value to the advertiser. This helps to avoid the wastage of purchasing advertising impressions being shown to a user which has no interest in the advertiser’s product (and accordingly, the advertiser can also act on a sliding scale of bid amounts – although a particular profile may not be of maximum value to the advertiser, it may be willing to pay a reduced amount to reflect the lower likelihood of a conversion).

One of the key features of DSPs is that they permit a single interface for access to multiple ad exchanges – allowing an advertiser to manage the entirety of their advertising inventory purchasing across all channels and networks from a single place.

Traditionally media buying was undertaken by a team of buyers making manual decisions as to the location of advertising inventory and the total cost. DSPs go hand-in-hand with programmatic buying; automated trading based on pre-set parameters running through a bidding algorithm.

Why use a DSP and not just an ad network?

The functionality offered by DSPs overlaps with that offered by traditional ad network, such as advanced audience targeting and inventory management. However, ask any DSP and they will tell you that the key to effective campaign management and optimisation is data. Using a DSP allows a single point of commonality across all campaigns and exchanges and allows data to flow from all campaigns into a centralised pot for analysis and processing. DSPs are usually charged on a flat-fee per transaction basis rather than a mark-up on inventory cost. As the technology stack and activities undertaken by the DSP are the same irrespective of inventory cost (that is to say, purchasing premium inventory does not cost the DSP anything additional over non-premium), it is difficult to justify the traditional ad network charging model of a percentage of total inventory cost as a transaction fee.

DSPs also power campaign retargeting, an effective, data-driven method of audience targeting based on prior user behaviour on-site.

Key differentiating features for advertisers

Reach

Can your DSP reach all the markets in which you operate and need to run campaigns? Very few are truly global and there is therefore a trend amongst advertisers to utilise multiple (usually 2 or 3) DSPs for targeting different geographies.
Can your DSP access all the inventory which you wish to purchase? As the DSP relies upon the ad exchange to allow access to their inventory, it is important to ensure that if you are intending to purchase inventory from specific sources that your DSP has access. Although generally the large DSPs have equivalent reach, there are certain “blips” which you may not expect. For example, until recently inventory on the Facebook Exchange (FBX) could not be purchase from Google’s DoubleClick Bid Manager. Although now resolved, this demonstrates how competitive tensions within the advertising market can result in access issues for advertisers.

Technology

As DSPs make use of real-time bidding algorithms which require split-second decisions, the quality of the technology used to power the DSP is critical. Every milisecond of latency reduction results in extra time for data crunching and allows the use of ever more sophisticated targeting algorithms. Turn’s technology stack, for example, provides sub-10 ms bid responses across half the globe. A technology platform such as this provides you with the best foundation for your campaign, allowing you to focus on other critical elements of your campaign without needing to worry about your underlying technology falling over.

Support and Scale

With the advent of Software-as-a-Service platforms, computing power is now incredibly cheap. One impact of this is to allow young, entrepreneurial individuals to set up seemingly large-scale platforms without the overheads of traditional infrastructure costs. Although this is great for adtech start-ups looking to play in this space, it does mean that a slick website can mask a two-man operation claiming a global service. The problem with this approach usually only arises when something goes wrong. A feature fails to operate, the platform is not available during a critical campaign or an algorithm fails to deliver the correct bid strategy – you pick up the phone to discover that there is no support team at all. Even worse, as soon as a critical issue impacts any one customer, the DSP folds and disappears together with all of your campaign data.

Be sure of the DSP’s ability to support you fully and withstand a crisis. Clearly this is unlikely to be a problem with large scale DSPs but is definitely something to consider when looking at niche players with specific USPs. That is not to say that smaller DSPs should not be used – some provide an excellent service with features not seen on the larger DSPs but make sure to check things aren’t too good to be true!

Costs

Cost models differ between DSPs and should be explored in depth before signing up. Some will charge a flat-fee per transaction, others a margin on inventory purchased (although infrequent), often an initial set up fee may be charged either upon account creation or for each subsequent campaign.

There is also often a minimum monthly or annual spend. Hidden costs can be added to the CPM costs of inventory if the DSP has signed a deal with the exchanges involved. Make sure you delve down into each charge and consider the true total cost of business with the DSP.

Fees are often linked to volume commitments; to enter an agreement or maintain rates in subsequent years a minimum number of transactions is required.

Data

In the world of advertising, data is king. Big data powers the audience regargeting, behavioural analysis and decision making sitting behind all DSPs. Ability in this space is therefore a critical consideration when selecting a DSP.

Make sure that your DSP supports a direct interface with the third party data providers you are already using or planning to use.

Also consider the data algorithms offered by your DSP. In the new world of multi-channel, cross-device targeting, make sure that your DSP is moving with the times and has a credible offering in this space. Just relying upon cookie tracking technology is no longer sufficient.

On top of this, consider data ownership. As an advertiser, you need to ensure that your data remains yours. This should mean that you are free to do what you please with your data and, if you wish to leave the DSP should be able to easily export your data into an industry-standard format.

Key DSP players

Although there are a huge number of players in this space, particularly when considering niche and start-up offerings, we have picked out four of the largest below.

Invite Media/DoubleClick Bid Manager

Owned by Google since 2010, Invite now is responsible for the development and running of the DoubleClick Bid Manager – Google’s DSP offering. DoubleClick Bid Manager offers a very comprehensive feature set and its deep (and guaranteed) integration with the remainder of Google’s advertising tools and the power of the underlying technology available from the Google ecosystem provide an important string to the bow of all advertisers. Some concerns do remain as to its continued support of non-Google platforms in future, particularly as competitors increase the pressure on Google in the advertising space (for example, as noted above it was only recently that Facebook and Google came to an agreement allowing DoubleClick Bid Manager to access FBX, the Facebook Exchange).

DataXu

Founded in 2009, DataXu broke through $100 million in annual revenue in 2013. DataXu sees an average of 50 billion biddable impressions per day and is consistently ranked as one of the fastest growing US technology companies. DataXu’s mobile advertising platform is particularly impressive although there have been some concerns raised as to the support capabilities of DataXu which it is reported at times can be less than stellar.

MediaMath

One of the founders of the DSP movement, MediaMath opened its doors in 2007 with new, nascent technology which evolved into the DSPs we see today. Boasting a client base of over half of the Fortune 500, MediaMath raised $175m in additional funds in June 2014 to fuel additional growth outside the US. Terminal One (MediaMath’s data processing and decision OS) has been particularly positively reviewed. MediaMath has enjoyed triple-digit growth year-on-year every year since it was founded.

Turn

Founded in 2006, Turn is a DSP which differentiates itself by its data management platform. Turn works with a vast number of advertisers globally. The Turn platform is designed to allow the use of third party data in combination with first party data with minimal effort on the part of the advertiser. Turn also prides itself on the quality of its technology stack – allowing sub-10ms responses to bid requests across half of the globe. Originally very US-centric, Turn has been somewhat slower to expand into Europe and further afield although its presence is continuing to grow and establish in these markets.

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