Media Zone: The ABCs of DSPs1 Aug, 2011 By: Steven Kaufman Response
|By Steven Kaufman|
DSP, RTB, DMP, SSP … OMG! What does it all mean? With a little bit of knowledge and the right partner, you can be up and running in a short time, but before you begin working with a DSP, it is important to understand how they work.
DSPs (demand side platforms) can be an effective tool for online acquisition. Simply put, DSPs allow an advertiser to access large amounts of inventory on a biddable basis. Similar to pay-per-click (PPC) search advertising, marketers can bid to a specific allowable and via the DSP’s technology. You bid only on inventory that is predicted to achieve your goals.
The marketplace begins with Web publishers. Many publishers generate more ad impressions than they can sell, while others are smaller and do not have a sales force. Excess ad impressions have historically been sold through ad networks that pay rock bottom prices to take the impressions from the publishers, then mark them up. Publishers realize less revenue and advertisers pay more.
Ad exchanges, which allow publishers to offer their ad impressions to the marketplace on a biddable basis, emerged as a secondary marketplace. Advertisers place bids for the inventory and — if the bid is accepted — the impressions are sold. While there is a fee to trade on an exchange, it is significantly less than the margin captured by ad networks.
In order to take full advantage of the exchange marketplace, advertisers need a DSP to access inventory. There are a number of functions the DSP performs:
- Access to inventory via seats on exchanges: There is often a registration fee. DSPs own seats on all of the exchanges and can access inventory on behalf of their clients.
- RTB (real-time bidding) capabilities: In order to bid, you need access to a bidding engine, as much of the inventory trading is done in real time, with each ad call sold to the highest bidder.
- Optimization algorithms: DSPs offer technology that identify and bid higher on desirable impressions, while at the same time recognizing low-value impressions and bidding accordingly.
- Access to third-party data: Several companies offer data for targeting purposes, which gives advertisers the ability to identify and bid higher on impressions that deliver an exact target.
- Analytics: Ads served, clicks, conversions and audience metrics are just a few of the data points generated. DSPs’ reporting capabilities allow advertisers to make sense of the information.
But how do you decide which DSP to work with? Consider the following questions:
- Do you want to trade yourself or let your DSP trade on your behalf? Generally, you are better off letting the experts manage your campaign. If you continue to scale to a point where you need more visibility, you can then manage things on your own.
- Do you need a DSP that offers a self-serve option? If you have no intention of taking control of your account, you don’t.
- Which supply sources are accessed through the DSP? More inventory means more bidding options.
- Will the DSP disclose its pricing model? DSPs are for-profit entities and are entitled to take a margin. But when they are selling against ad networks taking 50-percent (or higher) margins, they have to take less. The range (on top of media costs) that a competitively priced DSP should be charging is 15 percent to 25 percent.
- How are reports delivered and when? The quicker reports are available via a technology interface, the lower the chance that the DSP is manipulating the numbers.
- How much visibility into where and when your ads run is required? If you require transparency, make sure it is available via standard reports.
Expect it to take a week or two before the DSP algorithms begin to hone in on the right inventory sources at the right bid price. Once that happens, you can begin to scale your campaign and realize the true impact of this new, dynamic media marketplace.