PART 1 of 3: The Rise of the Demand-Side Platform
What would you do if you had $70 million between the couch cushions and your name rhymed with Woogle? Well, you might consider buying a 2-year-old start-up company that promises to help change the course of an industry that is still fairly new.
That’s effectively what search and advertising juggernaut Google did when it made headlines for buying Invite Media on June 3, 2010, hoping to augment its display-ad business. By leveraging the start-up’s technology platform, Google now touts a product that allows advertisers to bid on ad-display space in a live-auction-based environment. Invite Media is one of a growing number of companies called demand-side platforms (DSPs), which advertisers and ad agencies are hoping will automate the media-buying process amid an increasingly cluttered digital-media landscape.
The plight of the advertiser or ad agency today is filled with difficult decisions on where to place online advertising and whether the ad space (hundreds of billions of available impressions) purchased on carefully selected websites will result in a memorable brand experience or, better yet, a direct e-commerce transaction.
Now breathe! If only there were a central hub that plugged into all these companies and centralized their offerings, ultimately streamlining an otherwise complicated and time-consuming media-planning and -buying process.
Enter the DSP, a media-buying “software” that gives buyers powerful bidding tools and direct access to industry suppliers of ad space and consumer data, all accessed through a clean yet powerful user interface. The DSP sits between ad-space buyers (advertisers, agencies) and ad-space sellers (websites, ad exchanges, inventory yield managers), acting as a neutral facilitator of the buying and selling of online display media in an auction-based bidding model similar to the stock market.
Valuable user information – such as recent online behaviors, characteristics, and even offline buying information from the aforementioned third-party data companies – is integrated into the system and available as à la carte add-ons for unprecedented ease of targeting across media buys. The DSP’s “secret sauce” optimization algorithm processes thousands of data points, such as advertiser targeting criteria, and bumps it up against the billions of ad-space impressions in auction to identify the best possible match, then bids in real time according to desirability on an impression-by-impression basis. Within milliseconds, an impression is brought to market, scored, sold, and delivered. In this way, advertisers are paying only for the true value of each impression.
For savvy e-marketers that have long established their core online audience and yearn for a transparent view into optimization tactics, most demand-side platforms seamlessly blend technology with marketer-defined rules when making decisions against an impression in auction. Harvesting user data and gleaning intelligence on the person who unknowingly waits for an ad to load on a Web page is the industry’s most current obsession. DSPs play an integral part in the data movement and enhance the seemingly endless amount of user information made available today by marrying it to an abundance of otherwise worthless remnant inventory.
It’s a shift to buying audiences, not sites or even placements per traditional media-buying practices.