Marketing technology is constantly evolving. As the lives of customers become ever-more technology-centric so do the techniques and tactics available to marketers.

Most marketers will have heard about programmatic advertising (if you haven’t, read this post I wrote a while ago), but may be struggling to understand how all the pieces fit together. One term you will repeatedly come across in any background reading on the matter is ‘DSP’ – or Demand-Side Platform.

Essentially, a DSP is a piece of the technology puzzle that fits into the larger real-time bidding ecosystem. It enables buyers of digital advertising to manage multiple ad exchanges and data exchange accounts through a single interface.

That’s the basic definition – what follows is a slightly more detailed explanation of how they function. I’ll try to keep it as straightforward and simple as possible. If you have any questions leave a comment at the end of this post and I’ll get back to you.

How do DSPs actually work?

DSPs allow advertisers to purchase impressions across a range of publisher sites. These impressions can be highly-targeted based on information such as the browser’s location and previous online behaviour.  In fact, the potential accuracy of messaging is wholly reliant on the quality and accuracy of the data used.

Publishers make their ad impressions available through marketplaces called ad exchanges (and SSPs – Supply Side Platforms), and DSPs automatically decide which of those impressions it makes the most sense for an advertiser to buy based on algorithms which increasingly rely on demographic and behavioural audience data – the better quality the data the more accurate the DSP can be.

When a visitor lands on a site the DSP does some number crunching  and communicates with a Supply Side Platform and/or an ad exchange to establish the value of an incoming impression then places a bid accordingly.

It matches the most relevant ad up with that visitor depending on their potential to purchase particular items based on what it knows about them and how much the advertiser is willing to invest to reach them. What it results in is a relevant ad being placed in front of a person who is more likely to be interested in the products offered.  What this does mean is that there’s little-to-no need to negotiate prices with buyers, because impressions are simply auctioned off to the highest bidder. That process takes place in real time – the time it takes a webpage to load.

Most brands operate whitelists of websites they want to appear on.  This allows advertisers to have some umbrella rules in place to cater for potential compliance rules or brand guidelines.

Ad networks and DSPs

DSPs and SSPs are now inheriting the space previously occupied by ad networks. And while it could be tempting to say they’re forcing ad networks  out in fact the lines are simply blurring. While there are quite a few ad networks that haven’t adapted, and are consequently losing market share, there are a fair number that are offering DSP services – or services similar to those provided by a DSP. Likewise, many companies that started out as DSPs are beginning to look a lot like ad networks as they buy up inventory, repackage it, and resell it to advertisers.

What is under serious threat is the practice of humans buying ads (also known as direct or pre-guaranteed media buying) ad buying. Publishers are making more of their inventory available through exchanges and increasingly most advertisers would rather purchase ads using DSPs because it’s more cost efficient to do so. Essentially they’re finding they get more bang for their buck.  Despite this, some form human input will always be required to help optimise campaigns and formulate strategy. It’s simply the transactional level that won’t require human input.

How can marketers make the most of what DSPs have to offer?

This brings us to the crux, DSPs, programmatic and real time bidding all lie at the intersection of data and technology.  The technology is there, and the intent, but without the data it simply won’t work. So make sure your data is in the right place. If you run campaigns based on bad or incomplete data it doesn’t matter how sophisticated the   distribution method – or how effective the DSP is. The same issue needs to be considered by website owners and publishers themselves – ads on their sites are never going to be as effective as they can be if the data the advertisers are using isn’t up to scratch.

Brands that are ready for programmatic and are able to manipulate and analyse data sufficiently will be better equipped to thrive in an advertising world dominated by DSPs.