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Beyond AdWords: Demand Side Platforms Explained
An introduction to how DSPs work - a beginner's guide.
Having worked at a self-serve demand side platform (DSP) for over 2 years, one of the most common questions I get when trying to explain the concept of a DSP to others is: “Isn’t that kind of like AdWords?” Even amongst experienced marketers, most only have a vague idea of how DSPs work and how they ultimately differ from a platform like Google AdWords.
Most DSPs are similar to AdWords in that they are used to create ad campaigns. But, DSPs provide advertisers access into the vendor-neutral RTB ecosystem; whereas AdWords only allows campaigns to run within the Google network. The differences go beyond that, as well, especially on the display advertising side of things.
In this article, I’m going to break down the major differences between AdWords and DSPs, with the caveat being that no two DSPs are the same and therefore certain generalizations are required. Being that I work for SiteScout, there will obviously be some bias in that regard.
Extent Of Reach
Reach is one of the major differentiators between AdWords and most DSPs. When you are dealing with audience targeting (retargeting) or contextual targeting, reach (or the number of sites and impressions available) is crucial to achieving scale.
The reach of the RTB ecosystem is unparalleled in the history of online display advertising. DSPs centralize access to inventory from well over a dozen supply-side platforms (SSPs), enabling access to a pool of over 15 billion impressions per day and rising. With the relatively recent addition of the Facebook Exchange (FBX), there is no question that DSPs have the upper hand in terms of reach.
This means that with the right targeting data, you can basically find your audience anywhere on the web (whether or desktops, tablets, or mobile devices) and show them your ads.
On the other hand, the Google Display Network (GDN), as available through AdWords, is limited only to Google/DoubleClick properties. Inventory from GDN is also available through DSPs as part of the Google/DoubleClick Ad Exchange (AdEx), among other premium publisher inventory. (Note: Non-GDN inventory on Google AdEx is not available through AdWords!)
With respect to targeting, many of the options available on AdWords are also available on DSPs: geographic targeting, day parting, frequency capping, and so on. Even more advanced targeting options like retargeting (or remarketing) are also available on both platforms. However, DSPs are unquestionably more effective at targeting audiences, given the reach of the RTB ecosystem.
Contextual targeting (i.e., targeting specific URLs based on the topic of the page) is another similarity between the two platforms, even though there are some differences in implementation. AdWords allows contextual targeting by keyword or category, while DSPs typically only allow for targeting by category.
This gives AdWords an advantage in that display inventory can be bought on a keyword basis; however, the relevance of the targeting is quite low, making performance difficult to achieve, even amongst veteran AdWords advertisers.
However, that’s where the targeting advantage ends. There is no question that the target capabilities of DSPs, made possible by real-time bidding, are far more advanced.
For example, when creating a mobile campaign on SiteScout, you can choose to target by a number of different criteria, including:
- Device manufacturer
- Handset model
- Mobile carrier
- Operating system
- Web browser
Furthermore, the pinnacle of targeting — cookie data — enables advertisers on DSPs to target by hundreds, if not thousands, of different criteria.
These targeting segments include everything from demographic data (age, gender, income, marital status, education level, etc.) to psychographic data (likes and interests) to behavioral data (e.g., company they bank with, brand of car they drive, who they use for insurance, etc.) The scope of targeting options using cookie data is practically limitless, and the easiest way to achieve scale is via DSPs.
Data Freshness & Granularity
Another important difference between AdWords and DSPs is the ease with which you can view the performance of your campaigns through the reporting interface, and the granularity with which you can apply optimization decisions to your campaigns. This is largely dictated by the freshness and transparency of your campaign data.
In AdWords, there is a reporting delay of roughly 2-3 hours for some stats (such as clicks, impressions, and conversions), while other metrics are only updated once a day! If you look closely at the footer of the AdWords interface, you’ll notice the following disclosure in small print:
“Reporting is not real-time. Clicks and impressions received in the last three hours may not be included here. There is an 18+ hour delay for some metrics.”
The data freshness and granularity on DSPs varies. Some offer very little transparency into where your ads are being placed, and have a day-lag in reporting. Others are much better. SiteScout, for instance, reports in real time – meaning that you are both bidding on impressions in real time, and getting up-to-the-minute statistics, as well. It also provides significant granularity in reporting, allowing you to uncover insights that are not possible with AdWords.
For example, looking at the performance of specific placements on a specific website, you can uncover some extremely useful optimization insights. You might find that a certain ad unit, placed below the fold, happens to draw a very low click-through rate (CTR), bringing down overall campaign performance. Being able to disable such under-performing elements is crucial to effective optimization.
When you look closely at these two factors — data freshness and granular reporting — you realize that both are key features for effective optimization, especially with the rate at which ad impressions can be bought from today’s massive real-time exchanges.
When it comes to display ad inventory, CPM is the foundation of all pricing. (In the RTB ecosystem, it’s eCPM, to be more precise.)
Moving to a pure CPC or CPA model transfers more risk to the publisher, which complicates matters in a centralized market such as RTB. However, some DSPs do offer the ability to run campaigns with a CPC or CPA price target, but such options only optimize to those goals, effectively. Underneath, impressions are still traded on an eCPM basis.
Google can afford to offer a CPC pricing option through AdWords, mainly because they have direct control over publisher ad placements through DoubleClick and AdSense. Using their own algorithms, they can optimize both CPM and CPC bids to show higher-CTR ads at certain times, and CPM ads at other times, depending on price and performance, and what yields them the highest revenue.
(Tip: As a marketer, you can use this fact to your advantage. Using the AdWords platform, you can effectively test a variety of banner ads with very little risk using CPC bids. Once you find a set of high-performing ads, you can move them over to DSPs and direct buys with higher confidence.)
In terms of the mechanics behind the RTB auction process, it’s very similar to the way bidding works on AdWords for Search. It’s a second-price auction, where the highest bidder only pays 1 cent more than the second-highest bidder.
I’ve noticed a great deal of confusion from marketers with respect to DSPs and their accessibility in comparison to self-serve platforms like AdWords. Some think that in order to use a DSP, you must plug in using an API provided by the DSP. Others believe that the only option is to choose from a number of the managed DSPs out there, with contracts and high monthly minimums ($5-20k per month). Both are true, for the most part, which is why many marketing professionals and agencies are reluctant to commit.
For the record, I’d like to debunk the myth that there are no self-serve DSP options for RTB advertising. SiteScout, for one, offers the same accessibility of AdWords, but to the world of RTB.
I think it’s important to emphasize that Google AdWords, as the name implies, was primarily built around search, keywords, and text ads. The display network was an afterthought, bolted on after the acquisition of DoubleClick and the expansion of the AdSense program.
In contrast, DSPs were purposely designed around building display ad campaigns. Both DSPs and AdWords are buying platforms for advertisers, but when it comes to the focus, there is no argument over which product is focused purely on display advertising.
AdWords is obviously the king of search engine marketing (SEM) platforms. But when it comes to display advertising, the industry has evolved beyond what AdWords offers. Superior reach, targeting, and optimization are now found in the realm of real-time bidding technology and realized through demand-side platforms.
Some opinions expressed in this article may be those of a guest author and not necessarily Marketing Land. Staff authors are listed here.