DSP vs SSP vs Ad Exchange: What's the Difference?
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Pathlabs Marketing |
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June 20, 2023 |
In programmatic advertising understanding the roles and differences between DSPs, SSPs, and ad exchanges is crucial. Join us as we explore the intricacies of these power players and their impact on digital advertising success.
What is a Demand-Side Platform?
Definition of DSP
A Demand Side Platform is a programmatic technology marketers use to buy digital ad inventory and impressions in real time. In simpler terms, it is a platform that finds optimal locations to place ad content online.
DSPs are especially useful because they allow marketers to harness contextual and user data to target and bid on the best ad spaces that will most likely reach their target audience persona.
How DSP Works
Marketers go about their DSP journey by deciding which DSP platform to use. Upon this decision, they input their campaign objectives, audience targeting info, budget, and ad creatives into the DSP user interface; the DSP then analyzes and bids on user bid requests that align with these criteria. The bid amount a DSP selects will reflect the value the advertiser places on reaching the target audience at that particular moment—all at a CPM rate.
This entire process occurs right when the SSP notifies the ad exchange that there is ad space to be filled. Additionally, the DSP continuously monitors campaign performance, making real-time adjustments to bidding strategies and targeting parameters to maximize effectiveness.
Marketers can access comprehensive reports within the DSP's interface to evaluate and make data-driven decisions for future optimizations.
Advantages of DSP for Advertisers
“One significant advantage of using a DSP is that it acts as an extension of the marketer’s team, reducing the workload of media buyers and activators. Instead of manually negotiating ad placements, marketers can log in, input parameters, and let the DSP autonomously handle the media buying.”
DSPs are also highly praised for their data-driven approach: leveraging algorithms, predictions, and probabilities to optimize ad placements – providing a purposeful marketing approach for every campaign.
By connecting with multiple SSPs and ad exchanges on a local, national, even international scale, DSP technology enables marketers to reach specific niches that would otherwise be difficult to access.
Example of DSP
An example of a popular demand-side platform is the Amazon DSP. This allows marketers and advertisers to purchase ad inventory within Amazon and its other affiliated websites. This can be in the form of display, audio, or video advertisements.
With the Amazon DSP, marketers get to place their content on one of the most frequented websites in the world, lending many opportunities to connect with target users.
Other examples of DSPs are Facebook Ads – which place ads on Facebook and Instagram for marketers – as well as The Trade Desk.
Amazon, Facebook Ads, and TTD also have treasure troves of first-party data that only take targeting to the next level.
What is a Supply-Side Platform?
Definition of SSP
A supply-side platform is a programmatic technology that allows publishers to sell their ad space to DSPs for impressions. This technology is especially responsible for ensuring that the ad inventory sells for an optimal price.
How SSP Works
A publisher wanting to sell their ad inventory (webpage, app, video, DOOH, etc.) starts by selecting an SSP that they believe will give them strong connections to high-paying DSPs.
They then make their inventory available to the ad exchange. When users visit the corresponding ad inventory locations, the SSP notifies the ad exchange that there is a pending request for ad placement. The SSP will then take the winning bid and render the ad to the user within a fraction of a second.
Advantages of SSP for Publishers
Before programmatic, how much ad space publishers sold was contingent on how popular and well-connected they were to advertisers wanting to buy space. With SSPs, publishers can now offer up this inventory to a plethora of unknown advertisers eager to place ads.
The programmatic software in SSPs also advocates for the publisher, ensuring they get an optimal price on bid requests.
Lastly, an indirect yet handy benefit of SSPs is that DSPs try to bid on SSP bid requests that are hyper-relevant to their target audience. Therefore, the traffic visiting the publisher’s inventory locations will see relevant ads that pertain to their interests, needs, and hobbies – improving overall customer experience.
Example of SSP
OpenX is an SSP known for its technology offerings to publishers, such as Open Audience, and its proprietary ad exchange. One key factor contributing to OpenX's success is its extensive client base of prominent companies like LinkedIn, HP, and P&G. This association with reputable brands has attracted many clients and advertisers, resulting in a robust ecosystem with abundant supply and demand. As a result, publishers using OpenX can tap into an enormous pool of advertisers seeking to purchase ad space.
Where Do Ad Exchanges Fit In?
Definition of Ad Exchange
Ad exchanges are digital marketplaces where SSPs and DSPs sell and buy ad impressions.
How an Ad Exchange Works
“An ad exchange is a digital concept managed by AI that monitors the commerce between SSPs and DSPs, ensuring the placement of ads in real-time.
Ad exchanges may be public to all types of marketers and advertisers or private and limited to a specific community or industry.”
Advantages of Using an Ad Exchange
Ad exchanges are helpful to the marketing world because they displace the need for a physical marketplace and hours of manual labor negotiating ad placements.
Instead, the ad exchange is a digital ecosystem providing a method to the madness: connecting marketers trying to buy ads with publishers trying to sell ad space in real time.
As aforementioned, they also permit more marketers and publishers alike to tap into more prosperous, more diverse ad exchanges that meet their target audience needs. Thank you, internet.
Example of an Ad Exchange
Google AdX, also known as Google Ad Exchange, is a prominent ad exchange operated by Google. As an ad exchange, Google AdX facilitates the buying and selling of digital advertising inventory in an automated and efficient manner.
With hard work, Google Adx can integrate with other Google advertising products and services, such as Google Ads and Google Marketing Platform. This integration allows marketers to leverage cross-channel campaigns and access additional audience data, expanding their reach and optimizing ad strategies.
What is Programmatic Advertising?
“Programmatic advertising is a method that leverages platform technology, artificial intelligence, and machine learning to facilitate the procurement and selling of ad space in an automated fashion.
Marketers can manage this procurement and selling in many different ways; however, real-time bidding (RTB) is a popular model to run programmatic ads – interfacing with demand-side platforms (DSPs), supply-side platforms (SSPs), and ad exchanges. ”
Here's how these three parts work together. When a user clicks a link to a publisher’s inventory and waits for it to load, the connected SSP signals to the ad exchange that a bid request has been made.
The ad exchange then calls upon multiple DSPs to analyze the user's profile and place bids for the chance to display their ad to this specific user. Once the auction concludes, the SSP renders the winning ad to the user when the content finishes loading.
To clarify, yes, this auction takes just a fraction of a second.
Critical Differences Between DSP vs. SSP vs. Ad Exchange
“The core difference between DSPs, SSPs, and Ad Exchanges is that they are all individual functions used by different parties that work together to procure ad selling and buying.
DSPs are for the advertisers, SSPs for the publishers, and the ad exchange is the crossroad where the two meet to auction.”
When setting up DSPs and SSPs, they also require different skill sets, considerations, and platforms. Those running DSPs will look for the best platform options that tap into good ad exchange markets, target the right audience, and maximize ad spend.
With SSPs, publishers strive to choose platforms that give them the best bid prices and generate ad content pertinent to their users.
The Future of DSP, SSP, and Ad Exchange
A future trend impacting these three elements is the phasing out of third-party cookies. DSPs, SSPs, and ad exchanges thrive on third-party data for targeting purposes. However, by 2024, this data will be almost entirely out of the door. This prompts programmatic software providers to develop alternatives such as zero and first-party data options, contextual marketing, and even alternatives like the Walmart DSP.
What else? Technology will get more efficient and mind-blowing, meaning that SSPs, DSPs, and ad exchanges will only improve their capacities and abilities in targeting strategies, data analysis, and optimization.
We could even see changes with the specific creatives fielded in these campaigns: with ChatGPT and platforms that create art via AI, some platforms may be able to generate custom ad creatives and copy within real-time.
A final trend is consolidation and collaboration in the advertising ecosystem. There are so many different SSP, DSP, and ad exchange platforms, options, and integrations; marketers will likely need to continue putting forth new iterations that compile these many programmatic systems into straightforward user interfaces.
Overcoming Potential Challenges and Limitations
At Pathlabs, we have observed two common challenges that agencies and marketing teams face regarding DSPs, SSPs, ad exchanges, and programmatic advertising. The first challenge is the tendency for advertisers to embrace programmatic without carefully aligning it with their marketing goals.
“While programmatic advertising can be an effective means of reaching audiences, there are other options available. Smaller teams, for instance, may still benefit from marketing tactics like content marketing and social media posts without allocating budget to programmatic ads.
Usually, when there is budget, a need for scalability, and a requirement for targeted reach, programmatic should be considered.”
The second challenge is underestimating the complexity and effort involved in programmatic advertising. Yes, it does eliminate the headache of manual negotiations; however, learning the technology and developing optimal strategies takes time and patience.
By recognizing these challenges, hosting a clear understanding of marketing goals, and being ready to invest the required effort, marketing teams can navigate the complexities of programmatic advertising more effectively and increase their chances of success.
Conclusion
DSPs, SSPs, and ad exchanges are vital components of the programmatic advertising and RTB ecosystem, each playing a unique role in automating and optimizing ad campaigns. By harnessing the power of these platforms, marketers can unlock greater efficiency, targeting capabilities, and reach, ultimately driving better results and ROI. Understanding the strengths and nuances of DSPs, SSPs, and ad exchanges empowers marketers to make informed decisions and leverage the full potential of programmatic advertising in the ever-evolving digital landscape. Stay ahead by embracing these technologies and adapting to the dynamic world of programmatic advertising.
