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Ad Tech Deconstructed: What is a demand-side platform or DSP?

by Katy Jensen on Oct 10, 2017

The world of ad tech can be confusing—that’s why we’re bringing you our Ad Tech Deconstructed series. We’re putting ad tech under a microscope to examine exactly how things work. For today’s installment, we’ll talk about what exactly a DSP is and how it works.

Demand-side platforms (DSPs) are a fixture in the programmatic ad buying landscape. They’re a platform that manages multiple ad exchanges through a single interface to facilitate the buying and selling of digital ad inventory—in the mobile marketing world, this inventory lives inside apps. As opposed to traditional ad networks, DSPs exist to automate the mobile ad-buying process, and they do so while often yielding strong results for advertisers.

The process that DSPs use to buy ad space is called real-time bidding (RTB). App publishers make their ad inventory available on ad exchanges via supply-side platforms (SSPs), and through the RTB process, DSPs set prices and bid on ad space as soon as it becomes available. In literally milliseconds, DSPs process requests for ad space, choose the best impression, bid on it, and then the ad is served in an app.

This is what sets DSPs apart from traditional ad buying. In the past, ad buying involved a number of people and a longer manual process in order to place an ad. Now with programmatic technology, it takes less than a tenth of a second for a DSP to determine the value of an impression to a specific advertiser based on their targeting parameters and secure the ad space.

It takes less than a tenth of a second for a DSP to determine the value of an impression.

With programmatic, targeting (and retargeting) is more focused. DSPs can target based on several different anonymized factors—demographics, geography, the type of device being used, and browsing behavior, to name a select few.

DSPs also tend to have more advanced performance tracking capabilities that are not possible through traditional ad networks, allowing advertisers to optimize their ad spend more efficiently.

DSPs offer advertisers a way to automate purchases over a huge selection of publishers’ ad inventory. Highly focused targeting combined with the performance tracking capabilities that DSPs offer means advertisers have better control over the quality of the inventory they’re buying. They’re just a small part of the programmatic ecosystem that’s paving the way for better, higher-performing ad technology.

In the next installment of our Ad Tech Deconstructed series, we’ll be talking more about how developers’ ad inventory enters the mix with the supply-side platform.

Want to learn more about ad tech? Find out what a supply-side platform, or SSP, is right here.

Katy Jensen is AppLovin’s marketing cooordinator.

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