Audiences on Demand, Part II
Demand-side platforms and how can they can benefit advertisers
In the second part of this series, Yahoo’s Head of North American Region Mid-Market Display, Marc Grabowski, discusses demand-side platforms and shows how you can get the most out of them. In the first part, Marc explored the evolution of demand-side platforms.
What is a demand-side platform, anyway?
Back in 2007, a few ad networks knew the days of winning budgets on pure hustle would be short lived. In response, they developed new, differentiating technologies to help agencies utilize their client-side data and allow advertisers to limit frequency duplication—the repeated showing of the same ads to the same consumers.
Holding companies, such as WPP (which had already acquired the ad network, 24×7) and Publicis understood the opportunity in cutting out the networks, which were rumored to keep 50 to 65 percent margins on media. A pleasant side effect of this was that these companies could better serve advertisers.
How? By aligning themselves with a single partner, advertisers and agencies would receive maximum benefit. Instead of losing a major part of their budgets to the ad networks, advertisers and agencies could secure 100 percent of their audience budget.
These service providers have been dubbed “demand-side platforms.”
The two types of demand-side platforms
Demand-side platforms, or DSPs fit into two main categories: DSP techs and DSP holding companies. The DSP techs are technology providers and include such companies as Media Math, X+1, DataXu, Invite Media. These providers partner with agencies to buy media more efficiently. DSPs holding companies, such as Publicis, Vivaki, Havas AdNetic, WPP Zeus/B3, IPG Cadreon and OMG Trading Desk, on the other hand, work within holding companies and specialize in assisting their agencies to more cost-effectively buy audience segments
DSPs offer four major benefits to clients:
Billing simplification: Prior to the advent of DSPs, agencies were forced to work through bills (and discrepancies) from dozens of networks and publishers. DSPs work with multiple ad exchanges (such as Yahoo! RMX, Google ADX, and so forth) securing inventory that fit the needs of an advertiser, aggregating invoices into a single statement for the agency.
Data aggregation: Historically, the only data an advertiser could use in a buy was that developed and owned by the publisher. Now, DSPs allow holding companies to leverage advertiser-side data, including purchase data, in their campaigns. This makes media-buy decision-making much more precise.
Frequency control: If an advertiser uses a single DSP, the DSP can manage how many times a user receives and ad from that advertiser. This control ensures that an ad is shown the optimal times to make the best impression. Serving an ad too frequently to a user reduces the likelihood that user will engage with the ad. This, in turn, can lessen the value to the advertiser and lower the amount that the advertiser will pay to the publisher. When an advertiser reduces their acceptable rate they are allocated lower quality inventory, which will often lead to lower still likelihood of events. Maintaining the most efficient frequency allows advertisers to pay higher rates and receive the best possible inventory.
Inventory transparency: DSPs are normally transparent to agencies about the rates on which they buy inventory. The reason for this is price. Most DSPs only charge their clients a percentage for inventory procurement services. These rates range from 10 percent to 40 percent of total inventory buys. Inventory transparency is necessary for agencies to see that they are getting value for their money. As a result, DSPs are allowed the luxury to buy the inventory that best fits the advertiser’s needs, instead of buying low priced, low qua
lity inventory and marking it up in an effort to make a margin.
As an industry we are still in the early stages of demand-side platforms but the early results seem promising. If DSPs can deliver on their lofty promises of global frequency control, utilization of buy side data as well as invoice reconciliation and do it while being totally transparent, yet profitable, they will likely leave a lasting impression on media.
—Marc Grabowski, Head of NAR Mid-Market Display, Yahoo!
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[...] 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!), has penned [...]