What is a DSP?

Yellow background with the text DSP and a questionmark.

DSP, SSP, ad network and ad exchange, so many different terms, and while all of these differ slightly from each other, they basically do the same thing at the end of the day. In this blog post, we’ll break down what a DSP actually is, how it works, and why it has outgrown manual media trading.

What’s the difference between DSP and SSP?

Let’s start with some terms and definitions to get everyone on board. DSP stands for Demand Side Platform and is a piece of technology that facilitates programmatic media buying. In other words, DSPs help advertisers and agencies buy ad inventory in an automated way. Ad inventory is the available space that publishers sell and can take form as banner ads on websites, mobile ads in apps, or in-stream video ads, just to name a few examples. DSPs connect advertisers to big data, making it possible to buy inventory based on target specifications for the most optimal price, something that was merely impossible in the past. 

SSP stands for Supply Side Platform and is, on the other hand, used by publishers to help them sell ad inventory. This might sound like the same thing and it kind of is, but SSPs are basically the opposite of DSPs. DSPs are used to support the buying process and SSPs to support the selling process. Both hold a similar technology but the core interest differs, DSPs aim to keep inventory prices down in order to purchase ad space at the best price possible while SSPs try their best to sell inventory for the highest price possible. Both DSPs and SSPs are connected and integrated into several ad exchanges and work alongside representing two different sides, advertisers and publishers.

What is the difference between an ad exchange and ad networks?

Ad exchanges are online marketplaces for buying and selling advertising space. Consider this the big market where DSPs and SSPs gather to buy and sell at a shared marketplace. For a DSP to work it needs to be integrated into various ad exchanges in order to get their hands on available inventory for sale. 

Ad networks are an essential part of online advertising and work as the missing link between supply and demand. They match publishers’ ad slots with advertisers’ demand for ad inventory. Ad networks are often mixed up with ad exchanges, but ad networks do not offer the open digital marketplace ad exchanges offer. The difference between ad networks and DSPs on the other hand is more narrow. DSPs have increased in popularity over the past years and the main difference between the two of them is that DSPs charge a transaction fee based on the bidding price while ad networks add a margin to the inventory they offer and the price is therefore fixed and determined by the ad network. To confuse things further, DSPs have access to several independent ad exchanges and ad networks and can, therefore, buy from a very broad range of available ad inventory.

A diagram showing the correlation between DSP, SSP, Ad network, Ad exchange

Life before DSPs

In the (not so) good old days, all media transactions were powered by humans only. As you can imagine this was costly and time-consuming to negotiate prices, targets, and settings between advertisers and publishers and it could take days if not weeks before an advertisement actually went live. DSPs opened up the beauty of automated advertising, making it possible to bid in real-time and buy inventory from a large number of sites at the same time.

Why should you use a DSP?

Using a DSP simplifies the ad buying process significantly, as DSP networks provide access to multiple global ad exchanges, ad networks, and SSPs through one interface, instead of having to separately negotiate deals with each of the networks. DSPs are also very cost-effective, as they target specific demographics and provide the best ad slot for that demographic, for the best price available. This can happen because of the real-time bidding process that takes place. The bidding process is performed automatically and within seconds a new ad has been served to the advertiser whos target specifications and budget matched the supply best. It’s considered rather safe to use a DSP, as inventory often needs to meet certain criteria and be approved by the DSP before the trade can take place. DSPs also allows tracking of performance in real-time, which makes the whole process very transparent.

DSP and real-time bidding

Real-time bidding has opened up doors to a revolutionary way publishers and advertisers trade ad impressions. RTB is a true win-win scenario, as advertisers can use real-time data to target relevant users based on their demographics and online behavior. Publishers again earn better revenue through RTB, as a huge amount of buyers are competing in real-time to win the auction of the ad impression. If demand is high, meaning many buyers are bidding for the ad impression, CPM goes up and so does the publisher’s revenue. 

DSPs use machine learning and algorithms to analyze available ad impressions and calculate the best price possible to win the auction. This takes milliseconds to perform and is therefore an extremely cost-effective method to buy ad inventory and get ads to show on publisher sites.

Summary

To sum it up, there are multiple entities between advertisers and publishers when it comes to online advertising. Publishers can make their ad inventory available through SSPs, ad networks, ad exchanges, and DSPs are integrated to all of these and decide which ad slots make sense to buy for their advertisers based on targeting demographics and price. This whole process is automated and happens within a fraction of a second, thanks to real-time bidding. RTB also makes the price levels competitive as the price is determined by demand.