Tom Denford
By Tom Denford
May 24, 2012 1:09:40 PM

FAQs On DSPS - Demand Side Platforms In The Dock


In the Dock: Demand Side Platforms

What is a Demand Side Platform? A Demand Side Platform (DSP) is a technology platform that provides a single media buying point across multiple online display inventory sources (i.e. ad exchanges, ad networks and other media suppliers). They can exist as standalone technology platforms/suppliers, or within top agencies with a managed service layer on top - in this case they are often referred to as Agency Trading Desks.

How Does it work? Online display inventory (e.g. banner advertising) is bought via a Demand Side Platform using an automated auction based system that operates in real time. This means that the price for each impression can be determined and bid upon based on its value to a client’s goals at that moment. And because this value can be directly linked to business KPIs (e.g. online sales), proxy measures such as reach and frequency can be replaced by harder ‘outcome based’ metrics based on tangible value delivery.

The case for the prosecution In a nutshell, transparency - or lack thereof. As a relatively new and somewhat complex technology, it is easy for DSPs and Agency Trading Desks to bamboozle clients with technical language and terminology. This can be used to the agency’s benefit to mask a number of questionable practices such as arbitraging inventory (i.e. selling it on to clients at a higher rate than it was bought for from inventory sources).

Indeed, in a 2008 interview with Bloomberg Business Week, Irwin Gotleib (Group M’s global chief executive) stated that ‘...the rules have changed. In a world where ads can be customised to the individual and every click and ad view measured...advertisers and media companies alike will gladly pay for [our] quantitative expertise. In five to seven years, he predicts, he...will be an arbitrageur, buying ads in bulk, slicing them up for niche audiences, and reselling them at a premium. "Then," said Gotlieb, "we don't have to be transparent."’

DSPs will often also double charge clients for their services - charging both a ‘platform fee’ and agency fee (on top of profit from inventory arbitrage!). Clients must also be aware of any rebate or incentive agreements that are in place between DSPs and media suppliers that could call into question the absolute neutrality of these platforms. These incentive agreements can sometimes be masked as ‘strategic partnerships’ - for example whereby suppliers of online inventory provide investment to media agencies for developing internal trading platforms. It would certainly be valid to then ask whether or not agencies might be more inclined to channel investment to those suppliers.

The final area in which clients should demand transparency is with regards to the actual placement of their advertising message - to ensure that their message appears only in premium and ‘brand safe’ environments. It is crucial to develop ‘safe lists’ prior to running campaign activity via DSPs and also to use a campaign verification tool to audit media placement.

The case for the defence Buying online inventory via a single buying point across multiple sources allows for much tighter control of budgets. Because the value of every impression can be determined and bid for in real time, budgets can be managed dynamically to ensure that investment is continually focussed into the areas of the web that are delivering the best results and most value for clients. Thus campaign ROI can be optimised and improved vs traditional approaches to buying online ad campaigns (i.e. buying direct from multiple publishers or ad networks).

Moreover, using a DSP for online campaigns presents multiple audience targeting opportunities. Because DSPs have access to audience data across a huge network of media inventory, they can create ‘behavioural targeting’ segments within their inventory pools (i.e. targeting internet users based on their interests and behaviours). It is also possible to overlay 3rd party audience targeting data on top of media data to create very specific audience targeting clusters (e.g. demographics, social segments, psychographics etc.).

DSPs are also able to retarget users within their inventory footprint and can apply a ‘holistic’ frequency cap for the campaign across all inventory sources. This allows for multiple/consecutive messaging and also mitigates the risk of users being over exposed to any single campaign message.

The case for the prosecution summarised As a relatively new and unfamiliar technology, Demand Side Platforms are open to abuse and a lack of probity on the part of media agencies and other DSP suppliers. Comments from Irwin Gotleib certainly indicate that these companies are operating (or intend to operate) with a lack of financial transparency.

The case for the defence summarised Demand Side Platforms are a powerful tool for delivering strong ROI from online advertising campaigns, heralding innovative targeting opportunities and replacing proxy measures of reach and frequency with harder value based outcome metrics.

The ID Comms Verdict 

DSPs are indeed a powerful tool, but they need to be managed carefully. Clients should always push for absolute transparency from their DSP supplier so that they are 100% clear on exactly how money is being made off of the back of their media investment.

Clients looking to run campaigns via a DSP should also consider working with an agency selection expert to help them source the right solution for their needs (which may or may not be best met by their existing media agency of record). Some clients prefer to execute buys via DSPs ‘in house’ by licensing platform technology whilst using their agencies as strategic advisers. Other clients prefer to use agencies for both planning and buying expertise whilst others still may use a hybrid of these models, involving 3rd party technology suppliers. There are several options and it is important to identify the right solution for your company’s specific needs.

An expert adviser will also help clients to ask the right questions of DSPs in order to structure commercial terms that work in the best interests of their business and ensure financial probity on the part of their chosen supplier.

If you need more on this or a recommendation tailored to your specific requirements, get in touch with us confidentially.

In the Dock: Demand Side Platforms

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