How did ad tech come to be and what were all the key components of the revolutionary digital landscape? We’ll go through that. But first let’s go over one of the most important parts in ad tech today: The DSP. After that, you’ll have a better understanding about how it all came together.
What is it exactly?
The DSP also known as Demand Side Platform, is a powerful media buying platform that allows advertisers and marketers to purchase highly targeted digital ad space efficiently and at scale. DSP’s provide an all in one interface where advertisers can control the targeting, reporting and billing aspects of their media buy. The DSP brings lots of transparency and complete control to the advertiser or brand.
That being said, this once was not the case. Let’s explore the history of adtech to understand how the buying and selling of ad space/impressions used to work.
The first banner ad was created around 1993-1994 by a well known company called AT&T. Their first banner ad was placed on hotwired.com and they spent $30,000, receiving an outstanding click through rate of 44%.
Ads during this era were bought and negotiated via one-to-one direct deals between advertiser and publisher. This was an exceptionally revolutionary time with new technology emerging, including the growth of the internet. With this kind of growth, striking deals were hard to scale. The process of buying and selling was highly burdensome and left publishers with the problem of figuring out what to do with leftover ad inventory.
Just as it sounds, ad networks link advertisers (buying ad space) and publishers (selling ad space). Essentially, they are the middleman of the two.
The first ad networks were created in 1997, matching buyers and sellers, aggregating unsold inventory across publishers in the ad network. This unsold inventory was then resold to advertisers. During this time, left over inventory sold at discount left high margins for ad networks compared to inventory that was sold directly. However, this became a problem due to lack of transparency and fair pricing. Bulk sales made it unclear on where the ad would be placed on a website, the format of the ad and how the ad was priced compared to other advertisers competing for the same space.
Because this was a booming time for the internet, ad buyers and sellers were hard to deal with. Barriers to entry were low, so there was a lot of competition.
As one might assume, an ad exchange is a buyer-seller marketplace for mass sale of individual impressions. They create transparency with full control for the advertiser and competition among advertisers. The ad exchange is built around an auction model where the publisher sends detailed information about itself and the anonymized user to the exchange.
The ad exchange cross references information provided by the publisher with specific targeting and bidding information provided by thousands of different advertisers. Based on this information, it decides which ad is most suited to fit the available placement.
Tying it all together: DSPs work in tandem with ad exchanges.
As a refresher, a DSP is a platform that allows marketers and advertisers to programmatically bid on and execute ad buys on ad exchanges. It is a central platform that allows for high reach and highly specific targeting. When ad space is available, an ad exchange will send a bid request to advertisers. There are billions of these requests a day – where the DSP will sort out each individual one. Within seconds a DSP will decide based on these bid requests, whether to respond or how much to bid as well as what ad creative to serve. Without a DSP, these bid requests would not be possible to handle.
This user interface provides capabilities such as targeting, geolocation, device type, audience segmentation, ad scheduling, frequency capping etc. This all determines how the DSP handles bid requests in real-time on an impression by impression basis.
With all this said, an advertiser needs a DSP to control things like bidding, spending, ad scheduling, brand safety etc.
With technology constantly evolving, more is expected with DSPs today. Broad reach, tech integration, precise control, high premium inventory, efficient workflows and accurate measurement are just some of the capabilities that you would see with DSPs today.
Furthermore, the DSP has evolved to having huge amounts of transparency, control and efficiency for the advertiser. As well, advertisers are able to purchase highly targeted digital ad space efficiently and at scale.