Varos Glossary

Demand-Side Platform

Many people don't know just how complex digital advertising really is. The industry has spent years streamlining and optimizing the buying and selling of ads. Demand side platforms and supply side platforms are the result of this work.

What is a Demand Side Platform?

A demand side platform, or DSP, is a software solution that allows agencies and advertisers to programmatically purchase and manage their ad inventory at scale. DSPs automate much of the decision-making process around real-time bidding, allowing a brand to seamlessly extend their reach across multiple ad networks, publishers and exchanges.

Why Are Demand Side Platforms Important?

By leveraging a demand side platform, your organization can focus on optimizing spend and other core metrics rather than bidding and placement.

Consider for a moment the sheer scope and scale of the Internet. There are over 1.13 billion websites in the world, while total Internet traffic is expected to reach 150.7 exabytes per month by the end of the year. Now imagine if, instead of automating the process of purchasing and placing ads, you attempted to manage everything manually across that staggeringly-sized landscape — contacting literally hundreds of different networks and publishers while engaging in real-time bidding.

Sounds overwhelming, right?  Fortunately, because demand side platforms exist, you don't need to worry about any of that. Instead, you can focus on optimizing copy, creative, and placement. It is by all accounts a far more effective and productive use of your time. 

Demand side platforms also allow advertisers to manage and modify their campaigns in real-time, pulling ads that are performing poorly and pushing ads that are performing well. More importantly, they can do this at virtually any scale so long as their budget allows. 

How Do Demand Side Platforms Work?

On a typical ad network, you might bid on keywords or purchase ad inventory. On a demand side platform, you instead purchase the ability to reach a specific audience segment. How it works is deceptively simple. 

  1. First, select your target audience. Targeting criteria includes but is not limited to location, interests, demographic data, and behavioral data. 
  2. Design and upload the ads you want to publish targeting that audience. 
  3. The demand side platform will plug into multiple supply side platforms to access the ad inventory of publishers. 
  4. The demand side platform will automatically bid on ad impressions that meet your predefined criteria through these supply side platforms.
  5. Each ad that wins a bid is successfully placed.

This process happens in a matter of milliseconds — far faster than any human advertiser could ever hope to move. 

Understanding Demand Side Platform Advertising

With a demand side platform, marketing becomes less about competing for individual bids and more about managing and optimizing campaigns at the macro level. In addition to automation, expanded reach and granular targeting, DSPs equip a marketing team with comprehensive analytics and full visibility into their ad performance. Moreover, because they integrate readily with third-party tools, most DSPs don't require an agency to abandon existing software platforms or tools. 

How to Build a Demand Side Platform

Generally speaking, as an advertiser, you've little reason to build a demand side platform, as its architecture tends to require a level of technical expertise that most agencies lack. With that said, if you decide you want to embrace a full-stack approach to digital advertising, you'll want to ensure the following components are in place

  • A Cost Per Mille(CPM) bidding algorithm. 
  • A single-point management system to oversee connections between advertisers, exchanges, publishers, supply side platforms, etc. 
  • A targeting/retargeting system to ensure accurate delivery of advertisements. 
  • A real-time bidding solution, which will likely require machine learning.

Demand Side Platforms vs Supply Side Platforms

Demand side platforms and supply side platforms are basically two sides of the same coin. A supply side platform is typically how publishers and ad networks make their ad inventory available for purchase in the real-time bidding process.