What is a DSP (Demand-Side Platform) and how does it work?

Ad Networks and Ad Exchanges 

To perceive the meaning of DSP, you need to understand the logic of the development of Internet advertising. At some point, the process of buying and selling advertising on various Internet sites has become too complicated and time consuming both for advertisers and for those who sell ad slots. To simplify this mechanism, the first Ad Network was invented – which assumed the function of selling advertising space on multiple Internet resources. Thus, Ad Network acted as an intermediary between advertisers and publishers, allowing both to interact in the most optimal way.

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Over time, the number of Ad Networks has skyrocketed. And they had to split into numerous segments, targeted at different audiences. This, in turn, led to the fragmentation of the market. It became pretty difficult to effectively advertise on the network.

To facilitate this process, in 2005 there appeared the so-called Ad Exchanges, designed for effective advertising in a fragmented market. The interaction between advertisers and publishers became more transparent, but it was still difficult to control it.

Therefore, in 2009, two tools appeared to simplify the control of the advertising process and automate it. On the one hand – Supply Side Platform (SSP) that helps publishers control the sale of ad slots. On the other – Demand-Side Platform, which simplifies the process of buying advertising space.

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How does it work

Demand Side Platform is a mechanism for organizing auctions for advertisers, which arranges trades with SSP in conjunction with Ad Networks and Ad Exchanges. It is important that it buys impressions, not advertising spaces. In fact, the goal of DSP – to buy impressions as cheaply as possible and in accordance with the requests of the advertiser.

When the user follows the link, the Supply Side Platform starts trading on the Demand-Side Platform site. Based on SSP information, the DSP generates bids and conducts an RTB auction. Proprietary data from the advertiser and purchased information from the DMP (Data Management Platforms) are also taken into account.

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Different campaigns may require different DSPs: for full-fledged advertising, you need to exchange data with multiple platforms, plus interact with other RTB-system operators. To do this, the DSP-manager (Trading Desk) is used, which centralizes the work with several DSPs and manages data via own or third-party DMP.

Through the Trading Desk, the advertiser and / or agency sets the bid amounts, the required amount of impressions or clicks, collects the audience data and uploads all this information to the DSP. The platform analyzes this information, compares it with information on the audience available at auction and makes bids, seeking to buy impressions as cheaply as possible, and to select the audience as accurately as possible. By the way, all these events take seconds.

Using DSP, advertisers manage applications for placing ads and prices for demonstrating advertising messages to a targeted audience. As in contextual advertising, the mechanism based on KPI helps to improve such important indicators as eCPC (effective cost per one click) and eCPA (effective Cost per one Action).

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DSP has inherited the advantages of the previous generation of ad exchanges and has introduced a lot of new into the advertising industry. DSP allows agencies and advertisers to make transactions in real time. It provides ample opportunities for targeting the audience according to a variety of characteristics. It provides detailed reports for each impression. The report on the progress of the campaign is reflected in few seconds, which allows you to quickly reduce the cost of inefficient traffic sources.

All these features are collected in a single system, which gives advertisers a unique opportunity to fully control the course of an advertising campaign and maximize its impact on the audience.