Demand Side Platform definition
Demand-side platforms (DSPs) allow advertisers to access the inventory of multiple ad exchanges and purchase it via programmatic buying.
What is a Demand-Side Platform?
A DSP is one of the key players of the advertising industry. It allows for the automated and precise delivery of ads to the advertiser that won the auction or has secured a direct deal. A DSP takes a sizable load off advertisers’ shoulders and enables them to connect with multiple ad exchanges from within one interface.
How Does a Demand-Side Platform Work?
A DSP platform aggregates advertisers and allows them to submit their ads, along with traffic targeting criteria. It then connects with a supply-side platform, or SSP, whenever there’s a visitor that meets those criteria.
The way DSPs determine which ad to show is by using a programmatic buying model. This means that the price for displaying an ad is determined automatically based on options set by an advertiser.
The majority of programmatic buying is done using the real-time bidding model (RTB). RTB is an auction that occurs in real time when a visitor waits for a page load. DSP conducts this auction among advertisers interested in displaying their ads to this specific visitor. The winner of this auction gets to have their ad displayed.
RTB auctions may employ either the first price or second price auction model. The first one is rather straightforward: a winner pays exactly the winning bid. The second price auction model however works slightly differently. The winner is the one with the highest bid, yet the price they pay is the second highest bid in the auction. This allows advertisers to limit their ad spend to more reasonable levels, and, on the other hand, not to hesitate to overbid.
The other, less popular programmatic buying model is direct programmatic. This is usually reserved for premium publishers that instead of participating in an auction, opt in for more direct deals with advertisers. Selected advertisers can access these deals if they meet certain criteria.
All these buyers conduct their bidding in a waterfall cascade, meaning that not all of them get a shot at bidding for traffic at the same time. Firstly, there are direct buyers that can purchase premium traffic. Next there’s the RTB auction and the leftover traffic is then sold to fallback buyers.
Header bidding is the new approach that simply allows everyone to participate in an auction before this waterfall cascade even begins.
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What are the Benefits Of Demand-Side Platforms?
DSPs are great for small to medium enterprises that would like to access rich ad inventory without the hassle of manually connecting with various publishers, as they would have to with ad servers for example.
Big enterprises can benefit from DSPs, as some of them offer a white-label solution or other features. Voluum DSP, for example, has been built on the Voluum Tracker architecture. This makes working with it easier: companies have to use only one platform for managing ads and running tasks, have only one account owner to contact or use various bulk solutions.
DSP platforms are usually free to use but the price for it are small bid markups that DSPs add to cover their expenses.