Demand Side Platforms: What is it? How does it work?

Mapendo Team
May 10, 2022
Demand Side Platforms: What is it? How does it work?

Demand side platforms have never been more important due to the latest evolution of digital advertising. In order to properly compete with the many other platforms, which offer similar services, they have been constantly improving and updating their technological power, making ad buying and selling easier.

By using demand side platforms, advertisers are able to have better tools to track ad performance while using less budget. But what can DSP do for your business? Let’s dig deeper.

What is a Demand Side Platform?

A demand side platform, also known as DSP, is basically an operating system which lets advertisers buy digital advertising with a completely automated process. To be more specific, it is a technological platform that allows marketers to be linked directly to publishers who are selling their ad inventory through a marketplace. DSPs are indubitably a major part of the programmatic business, as they enable advertisers to purchase ads in a faster, cheaper and more efficient way.

The targeting ability is for sure one of the biggest capacities of a DSP, by leveraging it, advertisers can reach the specific segment audience they are interested in. Also, another important key feature includes the possibility for you to manage most of your digital ads within one interface.

Demand Side Platform: How Does It Work?

As we have already stated, DSPs let advertisers buy ad spaces through an automated real time bidding platform, instead of having to do it manually. This process can be explained in a few points:

  1. After selecting which audience segment they want to reach, advertisers upload the ads (creativities and banners) which need to be published.
  2. By using supply side platforms and ad exchanges, publishers make their ad inventory on the DSP accessible.
  3. Said platforms show to the DSP the ad impressions, so it can base its decision on the targeting criteria put before by advertisers.
  4. Advertisers will consequently compete among them for the ad impression placing bids in real time.
  5. Afterward the demand side platform buys the ad impression and the ad is visible on the publisher’s site.

This operation is done in a few milliseconds when a visitor is on the publisher’s website. You can compare this process to a classic auction, where there is an online space which has both somebody who is trying to sell it and someone that is willing to buy it. The DSP works to get rid of the middleman and to make the connection between seller and buyer less demanding and more pragmatic.

The Structure of a Demand Side Platform.

To understand better how a demand side platform works is fundamental to know which are the components that build the structure of a DSP. Each of the following pieces play a key role behind the scenes of the management and optimization of an ad campaign.

Let’s start with what is at the base: integrations. To make demand side platforms work, the DSP needs to be connected to multiple supply sources, such as ad exchanges or supply side platforms. Often DSPs are integrated with data management platforms to not only improve ad targeting, but also ad verification.

What is responsible for the placing of the bids in the real time auctions is called bidder. And typically a DSP has more than one bidder located in multiple data centers to be sure of receiving and responding to bids without running out of time.

The ad server is important for two reasons:

  • It is in charge of storing creatives.
  • Its responsibility of displaying the ad to the user. There might be cases where the DSP has an intern ad server, while others where it needs to be supported by an external one.

Data involving the performance of the campaign are being collected by campaign trackers, for instance win notifications or impressions. Those data will be then sent to the reporting database.

It might be easy to overspend during real time bidding due to the enormous amount of bids sent every second. To avoid this issue there is the banker, also known as campaign spending control.

The reporting database has the duty to store the data collected previously by the tracker campaign and to generate cumulative reports. After being sent to the user interface they will be displayed on it.

The user profile database is used to store all the users’ data, for instance which ads they have visualized or to which segmentation they belong to.

The Purposes of a Demand Side Platform.

Before the appearance of DSPs, digital ads were manually commercialized by ad buyers and salespeople, the goal of a demand side platform is keeping that process as simple as possible.

In fact, when DSP became a reality, the need of doing manual deal negotiations disappeared. Those platforms make it possible to automate the decision-making process: by deciding on which impression bid and estimating the higher value of each impression. Doing that makes your digital ad experience faster and more cost-effective. Particularly because it allows you to control, track and optimize all of your digital campaigns in just one place.

Another major purpose of a DSP is to enable advertisers to address ad campaigns directly to the target audience; not only at the right time, but also on the proper screen and with the adequate ad format.

Differences between Ad Networks and Demand Side Platforms.

Even though you can find some of the same features among ad networks and demand side platforms, for instance the ability of reaching a wide range of resources or targeting, there are still important differences to consider. The biggest one is undoubtedly the all-in-one functionality that is owned by DSPs but not by ad networks.

Automation is another one to not forget, with DSPs all the process is made automatically from the bidding to the optimization. While there is still much to set up manually with ad networks, which might cause a slowdown to the transitions especially if you are dealing with an important number of campaigns.

The last one that is worth mentioning is the pricing, on the one hand the price of the impressions is set by the market when we talk about demand side platforms and on the other one is the network that determines the inventory pricing. And while through DSPs impressions are bought either with a real time bidding or with first price and second price auctions. Ad networks make marketers pay a fixed fee to acquire a slot of impressions, actions and clicks.

Which Types of Demand Side Platforms Exist?

Every business has different requests, and because of that there are various demand side platforms with features that can meet all the needs.

  • To support advertising on mobile devices, such as smartphones or tablets, there is the mobile DSP. This platform can provide you useful information to improve the ad experience on a mobile gear, for instance tracking the device model or the screen size.
  • Then there is the self-serve demand side platform, a DSP that lets the advertiser complete control over the buying process. Since the selection of the inventory to the management of the campaign.
  • When your goal is to customize a platform to make it perfectly works for your business, you are talking about a white-label DSP. That’s a platform that you buy outright to reinvent it with the purpose of suiting the desires of your company.
  • Instead, the managed DSP offers a full service, it is a platform that does all the work for the advertiser, which includes providing an account manager that will take care of the campaign for the whole time.

Advantages of Using a Demand Side Platform.

By choosing to use a DSP you can be led to a series of benefits that we have already talked about, such as the automatization of the process, how fast it is done and the pricing. Those are the ones that come instantly to your mind when the topic is demand side platforms, but there are other interesting aspects that should be considered.

The feedback is incredibly quick, shortly after the campaign is live, the performance indicators become available. For instance you will be able to see where the ads have successfully turned in a sale or which ads have the most clicks.

The user targeting is surely one of the better benefits of DSP, because those platforms store all the users’ data to constantly improve their targeting. Doing that the platform allows marketers to easily reach the right consumers through any possible digital device.

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Examples of Demand Side Platforms.

Looking at a few samples is the most effective way to understand better which services can be offered by a DSP. Those are just some of the most important platforms that you can employ.

A perfect instance of a functional DSP is MediaMath, founded in 2007, has partners all over the world among agencies and developers. One of its key features is the transparency, they ensure their consumers to always have access to their data and provide not only customization options but also an entire team of experts that can help you with the campaign set up and management.

A platform which offers strong targeting, buying and execution features is Choozle, a self-service demand side platform. Choozle has become one of the most appreciated DSP because it allows advertisers to have access to any programmatic impressions available, without a gulf between big and small customers.

Another option if you want to have the chance of buying digital advertising spaces is using the Amazon Advertising Platform, also known as AAP. It grants your business to reach people worldwide, buying impressions at scale on Amazon and other websites. In addition, AAP is able to leverage the data obtained from the online shopping behaviour of billions of people to do campaigns dedicated to relevant customers.

What is a fully managed DSP?

A fully managed DSP refers to a platform where a company has its own bidder and can guarantee a full service to its customers, following the process since the building of the campaign to its optimization. Taking care of all the aspects, such as accounting or analyzing the performance.

An example of a fully managed demand side platform is Mapendo, our technology is able to value among billions of offers and to give a response under 60 milliseconds. Thanks to the logistic regression algorithm, which allows us to predict the conversion rate of a campaign, we can guarantee a higher quality for your business. In addition, by using a self-optimization technology, we don’t need human intervention to do and to manage a campaign, minimizing the chances of error.

The advantages of a fully managed DSP.

The involvement of your marketing team is going to be extremely low, because a team of experts will pay attention to the campaign step by step. Which is a benefit that cannot be underestimated, doing that you will not waste your more valuable resources: your employees and their time.