Demand-Side Platform: What Is a DSP and How Does It Work?

Updated August 8, 2022

A demand-side platform (DSP) is one type of software program that has helped innovate the digital marketing and advertising field. By providing accessible and highly targeted services, a DSP can help advertisers reach consumers in real time based on their personal preferences.

In this article, we discuss what a demand side platform is, the advantages and disadvantages it offers, what types of programs are available for use and how to choose the right one for your business.

What are demand-side platforms?

Demand-side platforms are third-party web-server-based software systems that cater to advertisers, brands, app developers and marketing agencies to help them purchase mobile, search or video advertising space. Publishers can list their advertising inventory on a marketplace for advertisers to purchase impressions or promotional materials to contact users across a range of sites and other media. They can also allow the advertiser to set standards for a target audience and price point.

DSPs are independent from individual networks, which means they're not restricted to a single website or controlling group. Some agencies may operate their own buying platforms using licensed technology and software provided by vendors. DSPs may be categorized as self-serve, meaning the advertiser has a more active role in program campaigns or full-serviced, where the vendor or hosting organization provides additional help and guidance for using their platform. Certain DSPs may specialize in advertising locations, including:

Mobile: These platforms focus on advertising space for mobile browsing channels, such as in-app ads.
Video: These platforms work primarily with video-based sites and apps to compete for vertical video advertising space.

What are the features of a demand-side platform?

While each DSP may have its own slightly unique features, there are some that are common across most platforms, including:

Integrations: The functionality that allows the DSP to work with other programs or software, like data management and analytics platforms or payment gateways
User interface: The dashboard or content management segment that allows advertisers to access all of their information within the DSP
User profile database: The segment that allows the advertiser to list the characteristics of their ideal clients or target audience to help the algorithm determine the value of impressions
Reporting database: The segment that allows the advertiser to track and record data, including impressions, clicks, ad viewability and conversions related to one or all of their campaigns
Banker or budget manager: The functionality that allows the advertiser to define their budget parameters for each campaign, such as the maximum spending limit
Campaign tracker: The segment that allows the advertiser to track what campaigns are active and where they're being displayed
Ad server: The segment that displays the actual advertisement in a virtual location once a real-time bidding war has concluded
Bidder: The functionality that places bids on ad impressions in real time

What is programmatic advertising?

Programmatic advertising is the process of buying and selling ads with software programs and publishing those ads in context across channels based on the results of complex algorithms. Programmatic advertising includes traditional display advertising and ad sales on search networks. Types of programmatic advertising include:

Real-time bidding

Real-time bidding is a process used within DSPs that allows the advertiser to specify their target audience and maximum budget for a campaign before working to achieve ad space. After setting these boundaries, the DSP searches for available space and enters a real-time bidding war with other advertisers, using an algorithm to decide which ad is the most valuable in which space.

This algorithm is activated when someone clicks on a webpage, before the content loads completely. The algorithm may factor in the user's browsing history, IP address or location when determining which ads can have the highest impression rates for the highest bid.

Programmatic direct

Programmatic direct advertising is similar to traditional print or real-world advertising, just on virtual platforms. Here, publishers provide advertisers with details about their users or browsers, and they decide if that group matches their target audience. If it does, they reserve a portion of publishing space for a campaign. This type of programmatic advertising may be ideal for those who want specific placement in premium locations.

Importance of demand-side platforms

Quality DSPs can be transparent and user-friendly. They may also allow for easy, real-time management of ads and data tracking. These benefits may help advertisers understand the market rate for each impression they buy, control which exchanges to purchase and decide how much a specific space is worth to them, given the audience. Gaining digital advertising space can be competitive, so having tools like DSPs can help advertisers understand the system and learn to navigate and engage within it.

DSPs have upgraded how advertisers buy and publishers sell marketing space, and have led the transition from human ad buyers and salespeople to algorithms. This change has made the process less expensive and more efficient. Using a DSP may help advertisers scale their mobile efforts and expand across geographic locations with ease.

Related: What Is Digital Sales?

Demand-side platforms vs. supply-side platforms

Supply-side platforms (SSPs) are software programs publishers use to connect their inventory to ad exchanges. They allow publishers to filter ads by select criteria and set different rates for ad spaces to define their costs. Both DSPs and SSPs work together in the programmatic advertising process. They integrate to enable buyers to bid on different inventory.

Advantages of demand-side platforms

Some advantages of using a DSP include:

Efficiency

DSPs may allow advertisers to manage their campaigns and marketing efforts across multiple real-time bidding networks. Because everything is adjustable from one dashboard, you may be able to track all your information in one location, saving time.

Data

Many DSPs integrate with third-party data providers to offer as much information to the advertiser as possible in one place. Some may even allow you to import existing data from other management platforms.

Targeting

By using a DSP, you may have the ability to put more personalized ads in optimal locations. This can help increase your overall campaign engagement or increase the likelihood of conversions.

Support

Developers behind DSPs often provide customer support for their systems. Many have traditional helplines or documented frequently asked questions, though some may provide more in-depth advice or knowledge beyond traditional troubleshooting.

Inventory quality

Because they're not affiliated with one company or group, DSPs may have access to a wide variety of networks to which they can sell advertising space. Choosing the one that is right for your business may allow you the best quality access to your desired channels.

Reach

By using a DSP, you may be able to connect with a wider target audience. This could include reaching a larger number of potential customers, or reaching them in new geographical locations or through new platforms.

Disadvantages of demand-side platforms

Some disadvantages of using demand side platforms include:

Cost

Investing in a DSP could be expensive, depending on the particular service you choose. Additionally, full-serviced DSPs may have a higher price point than self-service options. Consider your budget before investing in a DSP and explore other options for virtual advertising if necessary.

Complexity

DSPs rely on intricate algorithms to help decide which ads are the best fit for available space. Sometimes, using a lot of data with multiple algorithms may add more complexity to the advertising process than is necessary. If you're just starting in online marketing or want to try a simpler solution first, consider the programmatic direct method.

How to choose a demand-side platform

If you plan to use a DSP for your virtual marketing campaigns, review the following factors when choosing a platform:

Consider the inventory

Think about what type of inventory a platform offers, whether web, mobile or video advertising space. Choose a platform that services many or all of the channels that appeal to your target audience.

Consider the audience

Consider the web locations that the DSPs service. Decide if their publishers have the variety and availability to spread your ads across different outlets. Also consider the amount of competition you may have for ad space at these particular locations.

Consider data integration

If you have previous campaign data, a pre-established data management platform, or aspirations to use a third-party data service in the future, consider how that can integrate with a DSP. Find one that syncs with your current analytics service with minimal effort.

Consider the targeting criteria

Consider how the DSP chooses publishers and how those publishers find and target their audiences. Decide if those publishers have enough available ad space to put your campaigns in front of your target audience.

Consider the algorithms

Platforms with sophisticated but accurate algorithms may help you get the most bids at the most competitive prices. Review the algorithms for your choice platforms and understand how they work. Consider contacting customer support for more information or deeper explanations about algorithm creation and execution.

Consider the pricing systems

DSPs may use different general categories for the costs associated with their programs and with the rates of purchase for impressions. These can include:

Cost per install (CPI): The cost associated with purchasing a program or license to use a DSP service
Cost per click (CPC): The price for ad space that drives traffic to landing pages on websites
Cost per action (CPA) and cost per lead (CPL): The price for ad space for lead-generated campaigns
Cost per view (CPV): The price for ad space used most commonly for video advertising campaigns

Examples of major demand-side platforms

Demand-side platforms may work with public or private advertisers and clients. They may offer a wide range of inventory for spaces such as display, mobile in-app, video and native display advertising. Here are examples of leading demand-side platforms that offer individual elements or combinations of these services:

AcuityAds
Adobe Media Optimizer
Criteo
Jampp
Liftoff
Mediasmart
Targetoo
X+1

Please note that none of the companies mentioned in this article are affiliated with Indeed.