How Does A Demand Side Platform Work?

by Sachin

Demand Side Platforms (DSPs) are the new hotness in digital advertising. They’ve been around for a few years, but there’s still a lot of confusion about how they work. In this post, we’ll explain what DSPs are and how they fit into the ad tech ecosystem. We’ll also look at their architecture and buying algorithms so you can get an idea of why they’re such an important part of this industry moving forward.

What Is A DSP?

A demand-side platform, or DSP, is an online advertising platform that lets marketers buy digital media by targeting specific audiences and managing ad spending. The best demand side platform is used by advertisers to buy digital ads — including mobile and social ad impressions — but can also be used for search engine marketing (SEM) and retargeting campaigns. They’re often used in conjunction with data management platforms (DMPs), which allow advertisers to store user data for future use.

DSP Architecture

First, let’s start with how the DSP works with publishers and advertisers. Publishers will put their available inventory on an ad exchange like the Google Display Network or AppNexus. The publisher will then set a bid price for each impression they sell. Advertisers can then access these exchanges to purchase impressions based on the criteria they want (e.g., audience size and targeting parameters). The advertiser is not charged until an impression is actually served, so they never pay for inventory that doesn’t get delivered in real-time (e.g., when you go offline).

The DSP acts as an intermediary between advertisers and publishers by taking control of this process from both sides: from publishers, who have no control over what ads are shown when a user visits their site, and from advertisers, who need more control over how many times one individual sees their ads across different sites before getting bored or annoyed enough not to buy anything at all anymore because of all those annoying pop-ups.

DSP Buying Algorithms

DSP buying algorithms are the brains of your DSP. According to StackAdapt’s experts, “They determine how much to bid on inventory, which type of inventory to bid on, and how to optimize bids in real-time.”

A great example is the algorithm will look at historical data and understand that a certain keyword is more expensive than others. Then it will use this information to determine how aggressively you want your bidder to bid in order to win impressions at a specific price point (or lower).

Afterward, it uses machine learning techniques like deep reinforcement learning and neural networks for ad optimization; these techniques analyze the performance of different creatives so that you don’t have to do any manual work.

DSP Reporting Metrics

When you’re running a demand-side platform, it’s important to understand the metrics that matter. There are many different variables that can impact your results, and it’s important to know how each of those variables affects your business. One common mistake is not keeping up with the technology and data collection trends in order to stay ahead of the curve. You need to stay current on what’s trending, or else you’ll get left behind by other DSPs who have moved on from using specific types of data sources or programmatic strategies.

Demand Side Platforms provide an easy way for advertisers to advertise their products and services. They provide a way for companies to reach their audience more strategically, whether that’s through retargeting or remarketing on Facebook or retargeting on other websites like Google AdWords.

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