Audiences on Demand, Part I
Demand-side platforms and why they evolved
In the first of a multi-part series, Marc Grabowski, Yahoo’s head of mid-market display for the North American Region, explores demand-side platforms, or DSPs, one of the most important current trends in the digital ad display market. DSPs aggregate advertising demand and place media buys for audience-targeted inventory across multiple supply channels—such as exchanges and publishers—while controlling exposure of a message to the audience. Below, Marc uncovers the origins of DSPs and discusses why they have evolved.
Not too long ago, advertisers and agencies figured out that they could buy advertising by audiences—not just by editorial source or, for that matter, by their relationships. That change in buying has created ripple effects that have arguably helped display advertising become more complex than search.
As a result, today we live in a place where networks aggregate publishers. Exchanges aggregate networks and data informs the buy instead of simply justifying it. And the lines between agencies, publishers, and ad networks are blurring as each one shoulders additional burdens to earn greater share of ad dollars spent online.
Display advertising has arguably become more complex than search.
A brief history lesson
Four or five years ago, agencies came to the realization that they should buy beyond editorial adjacency and invest in audiences—so, instead of buying advertising from one group of online sites, they buy impressions among, say, 18-to-35-year-old males, regardless of publisher. Soon after that, the volume of impressions across the Internet spiked due to a proliferation of user generated content. Ad networks created one solution to this problem by aggregating many sites into a single buy. Agencies eventually began buying from multiple ad networks and publishers—up to 800 sites in some cases.
Over time this method of buying led to over-exposure of ads to users. Over exposure decreases performance, which means ads are worth less to publishers, while advertisers received lower quality inventory. Lower quality inventory led to worse performance and lower still yields. This vicious cycle was driving down rates and leading to the emergence of a poor user experience.
A better model emerges
The advent of display ad exchanges and supply aggregation platforms has allowed holding companies and their agencies not only to recognize inefficiencies in the media buying process but develop a solution to address these challenges. This solution allows agencies to access inventory through automated channels, leveraging buy- and sell-side data sets, and incorporating frequency control across all publishers, thus increasing media buyer accountability due to clear auditing trails justifying both initial media allocations and optimizations.
A few years ago audience-based buying was only possible through negotiated ad buys leveraging multiple publishers. This type of buying allows for minimal frequency control or automation. Furthermore the number of media buyers necessary to manage these campaigns calls for a very expensive infrastructure, with costs that are eventually passed to the advertisers. The last major challenge is that accountability and reporting are subjective, with little consideration given to the entire brand experience. For instance, an event is heavily weighted on the last event recorded.
The two sides of the conversation
Agencies and publishers alike are beginning to break their conversations into two distinct parts: emotional brand building and audience-based buying.
Emotional brand building and specific site ownership require a great deal of human interaction. The goal is to create a solution unique to the advertiser that reinforces their brand message and creates an emotional connection between the brand and consumer.
Audience-based buying can mean a number of things, including targeting users based on demographics, geography or previously displayed behavior.
As a result, the world of demand-side platforms was born.
In the next installments of this series Marc will explore: what a demand-side platform is and how it can benefit advertisers; how DSPs affect the market, and the potential pitfalls they may encounter.
— Marc Grabowski, Head of NAR Mid-Market Display
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Great simple way of breaking down DSP’s and their evolution! looking forward to the next installments.
[...] been trying to keep you up on the emergence of demand-side platforms for awhile now (like here, here and here). Over at AdExchanger, Michael Walrath, former CEO at Right Media (now part of Yahoo!), [...]