What is DSP in Programmatic Advertising?

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Programmatic advertising is all about using technology to streamline the ad buying process. With AI-based algorithms doing the legwork for them, advertisers can be sure they’re launching more efficient, targeted, and relevant campaigns for their audiences.

It’s no surprise, then, that programmatic advertising is on the rise — accounting for almost 90% of all display ad spend in 2021. Meanwhile programmatic native and programmatic video also provide major opportunities for advertisers to build innovative, engaging campaigns.

So, for those who are just now diving into programmatic or looking to ramp up their strategies, it’s important to know the ins and outs of how this process works. And that starts with understanding the technologies that make programmatic advertising happen.

These include:

  • Demand-side platforms (DSPs)
  • Supply-side platforms (SSPs)
  • Data management platforms (DMPs)
  • Ad exchanges

In this guide, we’ll break down what advertisers need to know about DSPs, including the role they play in programmatic advertising and how they interact with SSPs, DMPs, and ad exchanges.

More specifically, you’ll learn:

  • What is a Demand-Side Platform?
  • How Does a Demand-Side Platform Work?
  • What is a Supply-Side Platform?
  • What is a Data Management Platform?
  • What is an Ad Exchange?
  • Pros and Cons of DSPs
  • Different Types of DSP Platforms

In later articles, we’ll cover programmatic video, mobile, audio, and more. Be sure to keep an eye on the Taboola Blog for weekly updates.

Ready to learn more about DSPs? Let’s get started.

What is a Demand-Side Platform?

A demand-side platform (DSP) is a type of software that advertisers use to automate the process of buying ad inventory from publishers. So, is DSP the same as programmatic? No, it’s just the tool that advertisers use to execute programmatic buys and campaigns.

With DSP programmatic marketing, brands can upload their campaign creatives, customer data, and audience segments. They can then set their budgets and let the platform work its magic: matching the advertiser’s offerings with the publisher’s criteria and ad inventory to find the perfect placements. Advertisers might also choose to work with specific types of DSPs such as mobile DSPs, video DSPs, and programmatic native DSPs, which specialize in certain ad formats and placements.

It’s easy to see how programmatic DSP platforms emerged to fill a major need for publishers and advertisers. As the internet expanded and more ad channels, targeting opportunities, and customer data sources cropped up, advertisers needed a way to buy and launch campaigns at scale. Otherwise, they’d waste valuable time and resources by manually communicating with sales representatives to strike each deal. And even if they could make that work, they still didn’t have the tools to automatically optimize their budgets and targeting methods.

That’s where DSPs came in.

How Does a Demand-Side Platform Work?

So, what is DSP programmatic and how does it work? When a reader visits a publisher’s website that contains an ad placement, the DSP is triggered to find the right ad creative to fill that spot. A real-time bidding auction then occurs, wherein advertisers compete for that placement in front of that target audience member. The advertiser with the winning bid gets the spot — delivering its creative on the publisher’s website.

When advertisers work with a DSP, they can select Taboola as one of their programmatic channels, for example. Taboola has direct integrations with the world’s leading DSPs, allowing advertisers to reach over 500M daily active users across premium publisher websites. Whether advertisers want to place ads on the homepage, mid-article, in-feed, or within Stories, they can access Taboola’s exclusive inventory and proprietary readership data to achieve massive scale and grab people’s attention.

Now, let’s break down the programmatic process even further by looking at the different DSP media buying methods.

Real-Time Bidding (RTB) or Open Marketplace

Real-time bidding (RTB) is the auction process by which advertisers compete for programmatic placements on DSPs. How does it work? Each advertiser sets their highest bid, often determined by cost-per-thousand-impressions (CPM). Then the DSP ad tech auctions those bids in real time for each available ad spot.

RTB is so effective because it allows advertisers to vie for potentially thousands of DSP ads across channels without wasting their budget. They know that each time they win an ad placement, they’ll never pay more than they allocated in advance. And if competition for inventory heats up, they can always increase their bid to get in front of their target audiences.

Not all programmatic advertising is purchased through RTB, but much of it is, because it allows for advertisers to launch more cost-efficient campaigns at scale.

Private Marketplace (PMP)

Private marketplaces (PMPs) are RTB auctions with one caveat: they’re invite-only and exclusive to certain advertisers. Advertisers might choose PMPs over RTBs so they can get access to select ad inventory from high-quality publishers.

Taboola, for instance, offers several different types of PMP deals, including:

  • Prime with Taboola for luxury native display placements
  • Premium High Impact Placements (PMP) for brand awareness opportunities from tier-1 editorial publishers
  • Views with Taboola for guaranteed 100% viewability
  • Reach with Taboola for reaching massive audiences across the world’s largest publishers

Programmatic Direct (PMP)

Programmatic direct is similar to traditional ad buying in that it involves creating a one-to-one agreement between a publisher and an advertiser. The difference is they agree on a guaranteed, fixed CPM, but the advertiser still buys placements programmatically through a DSP.

Because impressions are purchased a la carte, programmatic direct can be pricer and less scalable than RTB and PMP, but it also offers more transparency between the advertiser and the publisher.

What is a Supply-Side Platform?

If programmatic media buying is a coin, DSP is one side and supply-side platform (SSP) is the other side. When it comes to DSP vs. SSP, DSP is the platform advertisers use to buy programmatic ad inventory and SSP is the platform publishers use to sell ad inventory.

Just like DSPs help advertisers save time and automatically optimize their campaigns, SSPs help publishers instantaneously find the right ad partners and make the best placements for their revenue goals and audiences. This way, publishers know they’re serving the most relevant and lucrative ads on their sites.

What is a Data Management Platform?

A data management platform (DMP) is a software that advertisers use to collect, monitor, and manage customer data from across platforms. For example, a DMP might pull data from websites, apps, social channels, customer support centers, and email. The platform will then use that data to identify targeting options and parameters for programmatic ads.

As to the question of DMP vs. DSP, each platform fills a unique role in the programmatic buying process. The DMP holds and activates the data, and the DSP then uses that data to buy the most relevant, targeted placements. Together, the DMP and DSP work in sync as part of the overall programmatic advertising ecosystem.

What is an Ad Exchange?

Speaking of that ecosystem, here’s another one of its important components: the ad exchange. This platform is what connects the DSP and SSP. It’s the heart of the programmatic process and where the actual buying and selling takes place. The ad exchange is where everything comes together — the publisher’s criteria, the advertiser’s bidding parameters, and the customer data to ensure that the right campaigns are selected to run in real time.

So, how does DSP vs. ad exchange stack up? The DSP feeds the advertiser’s customer data, targeting preferences, and bids to the ad exchange, where they’ll be matched with the publisher’s data, which is fed through the SSP.

Advantages of using a DSP

DSPs are a necessary part of programmatic ad buying. The biggest advantages of DSPs include:

  • Enhanced targeting capabilities. Advertisers can use DSPs to deliver more data-backed campaigns and personalized experiences, leading to increased engagement and conversions. They can also use DSPs to retarget loyal or lapsed customers, driving up lifetime value and effectively nurturing relationships throughout the marketing funnel.
  • Widespread reach. Wish DSP programmatic technology, advertisers can easily launch a vast range of different campaigns across channels, expanding their reach and building brand awareness. A major US mobile carrier, for instance, wanted to educate customers across the country about its expanded coverage. They worked with Taboola to launch native in-feed and homepage ad placements across premium publisher sites, achieving a 100% viewability rate as a result.
  • Increased return on investment (ROI). The RTB system allows advertisers to manage costs by setting their highest bid amount, so they’re never overpaying for impressions. And with the widespread reach of DSPs, advertisers can more easily decrease their CPMs, so they can improve yield optimization and get more bang for their buck.
  • Saved time and resources. By using a DSP to automate the ad buying process, advertisers will have more time to build new creative strategies, dream up innovative tactics, and focus on continuously optimizing their campaigns instead of manually building each one from scratch.

DSP Platforms

With a variety of DSPs available, it’s important for advertisers to understand their options and consider the differences between each offering. Examples of popular DSPs include AdRoll, MediaMath, Google’s DV360, and The Trade Desk.

Here are some of the attributes to take into account when choosing the best platform for your business:

  • Ad formats and inventory. Does the DSP allow you to buy ads across websites and mobile apps? Does it support standard IAB ad sizes along with video, display, and native ad placements so you can reach audiences with the content that’s most engaging to them?
  • Compatibility with other platforms. Can the DSP integrate with your DMP so you don’t have to transfer all of your data to another platform and rework your analytics processes? Does it have integrations with any other third-party services to help you maximize your campaign distribution, performance, and tracking capabilities?
  • Brand safety. Does the DSP have features in place to help ensure your brand safety, such as including block and allow lists. Does the DSP have a screening or qualification process for publishers and ad placements, ensuring that your ads are only shown on high-quality, pre-approved digital properties?
  • Pricing. What is the DSP’s cost structure? Will you pay monthly, quarterly, or yearly? Does it include common charges such as cost per install, cost per click, or cost per view? Are there any hidden fees that could potentially eat into your budget and affect your ROI?

Conclusion

Programmatic advertising is only expected to grow as marketers seek new ways to streamline and optimize ad buying across touchpoints. In fact, programmatic display spend is projected to exceed $115 billion in 2022 and jump to $133 billion by 2023.

How can marketers make sure they’re staying ahead of the competition and harnessing the full power of programmatic? By understanding the importance of DSPs and finding the right platforms for their advertising goals.

Marketers can also take these best practices into account when building programmatic DSP campaigns:

  • Use contextual targeting to deliver ads alongside relevant content that matches your audience’s interests.
  • Test multiple creatives against each other to see which images, headlines, and descriptions your audiences prefer.
  • Collect first-party data across owned channels to prepare for a world without third-party cookie tracking and targeting.

As programmatic continues to flourish, you want to be ready to reap its benefits and take advantage of all that it has to offer. That means understanding the role of DSPs in programmatic advertising and having the knowledge to make informed, data-backed decisions about which types of platforms you need to succeed.

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