Ad ExchangeProgrammatic Advertising

What is Demand Side Platform (DSP)? How Does It Work, Pros and Cons

Online advertising is not about placing ads on the websites to reach the targeted audience. It has introduced platforms such as demand side platform for advertisers and supply side platform for publishers to maximize the ROI and revenue.

The platforms will help advertisers to find out the desired inventory for their creatives to reach the desired audience to promote their business. The advertisers and publishers have different platforms to manage their businesses.

Let’s learn what is Demand Side Platform (DSP) used by the advertisers to source the ad inventories from different publishers and effectively utilize their ad budget.

What is a Demand Side Platform (DSP)?

Demand Side Platform (DSP) is a platform that helps the advertisers to manage their demand or buy ad inventories from various publishers. DSP will help the advertisers to connect with the publishers in a real-time to buy the ad inventory from the desired publishers.

The platform provides a control over bidding the ad inventories and optimizing the campaign budget spend to increase the advertiser ROI.

DSPs helps the advertisers launch the successful ad campaigns by partnering with supply side platforms and publisher networks.  

Display & Video 360 (formerly known as DoubleClick Bid Manager), MediaMath, AppNexus, LiveRamp and DataXu are some well-known demand side platforms available in the market.

How Does Demand Side Platform Work (DSP)?

The advertisers encounter lots of competition while bidding for ad inventories in the marketplace. All the ad impressions fall down to DSP to compete with other buyers and win the required impressions on behalf of advertiser.

The auction starts for an impression in real-time when the user opens the web page. The entire bidding process will take place in a few milliseconds by connecting the multiple advertisers with a publisher. However, lots of activities happen in milliseconds from when the user opens the web page to seeing an ad on the web page.

On the demand side platform, it starts searching the ad campaigns that matches with the user behavior data received through ad request. For example, the advertiser is targeting to the age group of 20 to 30 years who uses mobile devices and interested in learning advertising.

Once receiving the campaign targeting criteria, the DSP will start looking for relevant users by requesting various ad exchanges. The SSPs will search for relevant user’s data within the ad exchanges and ask the advertisers to publish the relevant ads once they find the users matching to the advertiser campaign target ing.

The ad exchanges contact the DSPs who are looking for a user which matches the advertiser targeting criteria and initiate the auction. The winning bid is selected above the floor price set by the publisher and ad will be displayed to the user.

Likewise, advertisers set up multiple ad campaign in order to promote their products and services, and increase the business leads and conversions.

Advantages and Disadvantages of a Demand Side Platform (DSP)

There are many advantages and disadvantages of using the DSP by the advertisers. However, it depends on the advertiser budget, product/services they are promoting and the ROI.

Advantages of DSP:
  • Better Targeting: The DSP offers granular level of campaign targeting to help the advertisers to reach their targeted audience to convert them.

  • Better Campaign Management: DSP uses the algorithms to cater the needs of the advertisers. The platform ensures that they place the advertiser’s demand first and look for the inventory accordingly. Advertiser can also check their campaign performance at any time using the DSP’s reporting dashboard and optimize it accordingly.

  • Access to variety of ad inventory: A DSP stays in contact with multiple ad exchanges and regularly search for the relevant inventory based on the campaign targeting. This will help the advertisers to access the variety of inventory to run the ads.

  • Product Support: DSP offer product support to help the advertisers in case of any technical difficulties to manage their ad campaign. The team will support from setting up the ad campaign the troubleshoot the delivery issues.

  • Save Time and Efforts: Searching for desired ad inventory and placing an optimal bid is a troublesome and time consuming process for advertisers. DSP will take care of these activities on behalf of advertisers with limited interventions. Also, this will ensure that the advertiser budget is spent optimally to increase the ROI.
Disadvantages of DSP:
  • Complexity: Setting up an ad campaign is a complex process as it requires in-depth knowledge of how does it works to utilize the platform effectively. The advertisers need to spend good amount of time during the first campaign setup and understand the pros and cons of its usage.

  • Expensive for small advertisers: DSP is paid service and advertisers needs to pay some amount for using the services. Considering the amount that needs to pay for DSP, it may not be a feasible solution for the small advertisers to setup a campaign.  

Here’s an article to know what is ad exchange and how does it works. This article will help you understanding DSP and how it transacts with other parties.

Conclusion: With rise of programmatic advertising, technologies like demand side platform, supply side platform and ad exchanges emerged. DSP help advertisers manage their bids and ad campaigns effectively by increasing the ROI. DSP also assist the advertisers to find out the relevant inventories on display, mobile, search, and video platform to reach the targeted audience.

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