Demand-Side Platforms: A Full Guide to Understanding and Optimizing Their Potential

Fast forward to:

What is a demand-side platform?

How a demand-side platform works

The value that DSPs bring advertisers

What to watch out for with pre-built DSP solutions

How to elevate DSP experience with our expertise

Wrapping up

How do different audience segments respond to my ads, and what’s the lifetime value of customers gained through them? What’s the performance of my ad campaigns, and which websites or apps are best for my ads? Oh, and how much, after all, should I bid for ad placements, and how can I optimize my budget allocation?

Breathe easy! Because good news is on the way!

In a nutshell: a DSP (demand-side platform) can become a cheat code for all this.

Out of a nutshell, let’s go step by step through what DSPs are and how to make your life easier when working with them in this article.

What is a demand-side platform?

Machine learning and automation in advertising go together like peanut butter and jelly — an unbeatable combo! And right at the heart of this process are demand-side platforms. To get a complete bird’s eye view of these concepts and how this all fits together, here are the key facts you need to know.

Fact 1. DSPs are integral to programmatic advertising

Programmatic advertising uses automated technology for media buying to deliver ads to the right user at the optimal time and price. It includes three main components:

• Supply-side platforms (SSPs) that allow publishers to automatically sell ad impressions to buyers.
• Demand-side platforms (DSPs), the heroes of our story, that enable advertisers to purchase ad inventory across various platforms.
• Ad Exchanges — platforms where advertisers, agencies, networks, and publishers can buy and sell ad space, with prices determined through a bidding process.

Fact 2. DSPs operate through real-time bidding

RTB is a programmatic advertising method that conducts real-time auctions, enabling advertisers to bid for ad space instantly when users visit a website or mobile app, ensuring more targeted and efficient ad placements.

Fact 3. DSPs work across a range of devices

Initially introduced in 2007, demand-side platforms primarily facilitated the purchase of inventory for web browsers on desktops and laptops. In contrast, modern demand-side platform advertising now spans a vast array of devices, including smartphones and tablets, and covers numerous mediums like mobile, video, and native formats.

Fact 4. There are two main DSP auction models

Historically, the second-price auction model has been used, where the winning bidder pays the second-highest bid amount plus $0.01 for the impression.

However, there’s been a recent shift towards the first-price auction model, where the winner pays exactly what they bid on. This change aims to simplify the bidding process and provide greater transparency for advertisers, potentially encouraging more strategic bidding and leading to more efficient market outcomes.

Fact 5. DSPs are merely just intermediaries

DSPs can design, execute, and oversee numerous campaigns at once across various SSPs and ad exchanges, can automatically optimize campaigns to boost ROI, and deliver comprehensive reports.

Fact 6. Data is the heart of DSP’s targeting

Advertisers can target users based on various types of data, such as behavioral, contextual, and demographic information.

Typically, behavioral and demographic data are sourced from third-party data brokers or data management platforms (DMPs), which collect this information from a mix of online and offline channels.

Contextual data are generally provided during the bid request by ad exchanges or SSPs.

Fact 7. There is an immense diversity in DSPs

The market is filled with diverse types of demand-side platforms, each offering unique features. These differences span UX/UI design, integration with advertisers’ first-party data, ad format support, targeting capabilities, audience segmentation (with varying levels of detail), machine learning optimization, inventory access, reporting granularity and speed, and, of course, pricing. But some of the top demand-side platforms examples include:

• Xandr
• Facebook Ads Manager
• Adform
• DoubleClick
• The Trade Desk
• Adobe Advertising Cloud DSP

How a demand-side platform works

Think of a DSP as a highly efficient digital auctioneer for advertisers. Once an advertiser sets up their campaigns with specific targets and ad designs, the DSP takes over. It bids on impressions presented by ad exchanges and SSPs. Each time it receives a notice about an available impression, the DSP quickly analyzes the user data. It then determines the user’s value based on how relevant they are to the advertiser. This evaluation guides how much the DSP bids, aiming to win the most valuable impressions for the advertiser.

Here’s a practical example. Suppose there are several DSPs with the following target audience parameters:

1. Female, aged 18-30, with a cat.
2. Female, aged 50-70, with dogs and cats.
3. Male, aged 50+, with parrots.

Now, imagine a 25-year-old woman with a cat — information gleaned from her past purchases and viewed content — opens your video. Here’s where the magic happens.

The website with the video sends an ad request to the supply-side platform, which then forwards the request to the ad exchange. The ad exchange informs the DSPs that an impression is available and starts the bidding process.

The DSPs then evaluate how well the impression matches their preset parameters. Clearly, the first DSP, which targets young women with cats, has a much higher chance of benefiting from displaying their ad compared to the second DSP, which targets older women with dogs and cats, or the third DSP, which targets men with parrots.

In this scenario, the bidding process will look this way:

The value that DSPs bring advertisers

Given the cutthroat rivalry within the marketplace and the profusion of diverse DSPs on offer, it is evident that their demand is exceedingly high. The paramount reason for the indispensability of DSPs lies, naturally, in the myriad benefits they provide to media purchasers, including:

Streamlined automation

DSPs revolutionize the ad buying process through RTB, which automates the entire negotiation between media buyers and sellers, evaluating ad impressions, considering budgets and target audiences, and placing bids — all within milliseconds as a user loads a webpage. This automation ensures precision and efficiency, drastically reducing the manual workload for advertisers.

Immediate campaign insights

Once a campaign goes live, DSPs provide rapid access to performance metrics: advertisers can track impressions, clicks, conversions, sales, and leads. This real-time data allows for quick adjustments to targeting strategies, ad rotation, and remarketing efforts, ensuring that campaigns remain effective and relevant.

Extensive inventory access

A significant advantage of using a DSP is the ability to tap into a vast array of publishers through a single platform. This access offers a more diverse and global ad inventory than what advertisers could achieve independently. The inventory is often categorized by various attributes, allowing brands to strategically select ad placements. Advertisers can also tap into audiences both laterally and bilaterally, meaning they can not only target their specific audience more efficiently, but also extend their reach to a broader audience.

Advanced functionalities

DSPs empower media buyers with a suite of powerful tools to fine-tune their campaigns. Advertisers can blacklist certain websites and audiences, cap the frequency of ad displays to individual users, retarget across multiple ad exchanges and more.

Rich data integration

One of the standout features of DSPs is their ability to integrate with third-party data brokers and data management platforms. This integration enables advertisers to refine their audience targeting with greater precision, leveraging extensive data to optimize campaign performance.

Why limit yourself to one DSP when you can have them all?

Discover how Oxagile integrated multiple DSPs, flipping the script on how to configure, launch, and analyze ad campaigns.

See how to keep ad campaigns performing at their peak with a Meta-DSP solution (Hint: advanced targeting, CTV advertising, inventory checks, blacklist capabilities, smart notifications, and more are part of the magic).

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What to watch out for with pre-built DSP solutions

Marketing agencies can face various challenges when using pre-built demand-side platforms. These difficulties can result in dissatisfaction not only for the agencies but also for the DSP software vendors, as advertisers frequently voice their complaints. To minimize these issues and ensure a smoother experience, it is important to consider the following possible issues when starting to work with a DSP:

Lack of transparency

Some DSPs may lack transparency regarding the ad inventory sources, pricing structures, and fee breakdowns. Advertisers may face difficulties in understanding where their ads are being displayed, the quality of the inventory, and how much of their budget is being allocated to different stakeholders.

Data quality

Data quality issues can undermine any efforts, leading to inaccurate or incomplete targeting. These issues may originate from the sources of data, the timeliness of the data, and errors introduced when combining data from multiple sources, as different data sources often use different definitions and formats, complicating the process of accurately merging them.

Obsolete tech stack

Architectural limitations can significantly impede the growth of the customer base and the stable performance of the DSP. These outdated systems struggle to handle a high volume of simultaneous requests, resulting in missed opportunities and potential revenue losses. The inability to process large numbers of queries efficiently not only affects the scalability, but also undermines the overall effectiveness and competitiveness of the platform.

Limited capabilities

Limited capabilities in a DSP can significantly hinder its ability to meet the diverse needs of advertisers. These limitations may include insufficient targeting options, lack of integration with various data sources, and inadequate reporting and analytics tools. Such deficiencies can lead to suboptimal ad performance, reduced advertiser satisfaction, and ultimately, lost clients.

Learning demands

Many DSPs possess highly sophisticated interfaces and features, necessitating considerable time and effort for users to become proficient. For new or less experienced advertisers, the task of navigating through numerous options, setting up campaigns, and comprehending optimization strategies can be particularly taxing.

How to elevate DSP experience with our expertise

At Oxagile, we believe there are no bad DSPs, only untapped potential. With our extensive project experience in refining and enhancing DSPs, we know exactly how to transform these platforms to meet diverse needs and functions. Here’s how we make DSPs work better, smarter, and more efficiently:

Customization and enhancement of DSP functionalities

While most DSP systems come packed with features, agencies often require unique solutions tailored to their specific needs. Oxagile can help by customizing and augmenting the DSPs in use with new functionalities to ensure that DSPs are seamlessly integrated into the agency’s workflows, maximizing efficiency and meeting particular requirements.

Improving the technical aspects of a DSP

We can update outdated tech stacks and streamline the user experience, offering a refreshed UI that simplifies software use for marketing agencies. This makes the software more user-friendly and intuitive. Additionally, we provide advanced reporting capabilities, enabling agencies to access more detailed and useful data.

Developing DSP add-ons

Our expert AdTech developers create various add-ons and enhancements for existing DSPs, improving their functionality and tailoring them to the needs of agencies. This can include developing aggregators that unify different systems and tools into a single interface, providing a more comprehensive and convenient approach to managing advertising campaigns.

Integrating third-party AdTech solutions with a DSP

We integrate third-party AdTech solutions with DSPs to enhance targeting capabilities. For example, integrating Data Management Platforms (DMPs) into DSPs allows media buyers to better optimize audience targeting. We also offer the integration of machine learning for more accurate targeting, ensuring more effective use of advertising budgets and improved campaign results.

Wrapping up

If you haven’t explored using DSPs yet because the overall setup seems overwhelming, or if the list of DSP challenges has you nodding in agreement, don’t worry — that’s what we’re here for. Snagging the perfect inventory deals shouldn’t be a headache or a drain on your time and budget — our team of AdTech experts is on standby to prove this and demystify the intricacies of DSP development, enhancement, and management, and uncover the great potential of meta-DSPs for your business in more detail.