What is a DSP?

Just a quick post to go “on the record” in the context of the recent AdExchanger threads (1 and 2) defining/discussing “Demand Side Platforms” (DSPs).

I agree with those who indicated it is way too early to lock down a narrow definition of DSP.  Arguably anything that’s really a “platform” should never need a description that’s as detailed as the list offered in the first post, but regardless its definitely too soon in this particular market.

At this stage I think all are better served by a more general definition.  Fundamentally, I think any entity that meets the following criteria with sufficient breadth of capabilities is a DSP:

  • Technology that interfaces directly with demand-side entities
    • “Interface” does not necessarily mean GUI.  An API could be even more useful if it meets the customer requirements
    • Demand-side entities may include agencies and/or advertisers
  • Technology that adds significant value in the process of buying and/or management of media
    • Value could originate from data integration, forecasting, buy automation or other operational efficiency gains, supply source integration, delivery and/or pricing risk management, increased ad effectiveness through optimization, impression filtering/categorization
    • Etc., etc., etc…
  • Technology that operates as directed by the demand side entity (i.e., the customer)
    • The technology can be used flexibly and transparently by the customer in a way that benefits its business, with limited incentive conflicts

Obviously, technology is the common thread; DSPs will compete on the strength of their technology and networks with weak technology (essentially bucket shops, substituting people and excel for real technology) will find themselves increasingly squeezed between DSPs and exchanges.

One final point:  “platform” implies broad capabilities.  Many companies exist with valuable capabilities that meet the above criteria, but that couldn’t properly be called platforms.  I would suggest that Demand Side “Tools” (DSTs?) is probably more appropriate for more narrow capabilities.  These tools may be used directly by demand side entities and/or be packaged by DSPs.

About Andy Atherton
I am currently an SVP at AppNexus. I previously spent four years as COO and cofounder of Brand.net, a pioneer in programmatic reserve technology and leading digital media buying solution for top brands. Prior to Brand.net, I was Vice President of Pricing and Yield Management for Yahoo!, responsible for maximizing monetization of a global portfolio of display inventory worth $2B annually. Beginning in 2002, I created, developed and globalized Yahoo’s PYM function over a period of five years. Prior to Yahoo!, I was president and cofounder of Optivo, a venture-backed start-up that developed price optimization software for e-commerce retailers. More on LinkedIn...

11 Responses to What is a DSP?

  1. Gotta love definitions. We can play the game all day, but what you’ve done here certainly sheds some light on this industry and the verbiage in a very positive way. DST’s is a nice word as much of what people building are exactly that – not necessary the platform that allows. We love our buzz words and curious to hear what the next one is…

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  3. John Nardone says:

    Thanks, Andy.

    Nice work. The distinction between a platform and a tool is really important.

  4. Nick says:

    I would argue that transparency is perhaps the most important distinction when thinking about the difference between a DSP and what the traditional ad network. When you look at it broken down by your three criteria I think you will find many networks arguing that the fulfill your requirements of being a DSP (which is probably why we see a herd of networks trying to position themselves as DSPs).

    Technology that interfaces directly with demand-side entities

    While I’ll agree that most networks haven’t done a good job at this up until now, you’ll hear many of the networks talking about a better level of interoperability in both accepting inputs (in the form of data or just opening up functionality generally via APIs) and pushing data back to the client. While most aren’t there yet I would think that by the end of this year many will be.

    Technology that adds significant value in the process of buying and/or management of media

    This is the story that ad networks have been selling since the beginning of time. While it is true there are still a handful (or more) of pure arbitrage networks out there. Most would argue, at some level of truth, that they do add significant value through data and other operational efficiencies and that is why you have been working with them all along.

    Technology that operates as directed by the demand side entity (i.e., the customer)

    This is where I think the DSPs really differentiate themselves from the networks. Are they a platform that the advertiser and agencies can directly plug in to while not acting as an intermediary between that advertiser and their supply sources? If they are an intermediary will they be acting as the effective agency of record? If acting as the AOR will they still offer full transparency to the supply source into the advertisers buy or will it be opaque? If there is opaqueness at any level on top of what a typical advertiser/publisher relationship would have I would argue that they really aren’t a DSP, but just a network trying to move into a new market.

    The other question networks that are baking their DSP strategy have to ask themselves is are they willing to move to a business where the margins stand to be much smaller than what they’ve seen previously. The answer might ultimately be that they have to because the DSPs are ultimately providing much of the operational and strategic upside of a network with the added level of transparency that publishers are looking for.

    Conversely it will interesting to watch the DSPs to see if any of them get greedy and try moving back to the network model of old and the expanded margins that come with it.

  5. matt says:

    Andy, thank you so much for this. I’m working on a presenation to frame a day of discussions around RTB and DSP/Ts. I was having a nightmare trying to figure out what these DSPs were; every person I asked had a different answer.

    Reading this article, it now makes sense why that was the case. A collection of tools used on the buy side to simplify the process of media execution is really what we’re talking about, not some new global system (platform). Your piece allowed me to re-frame my thinking and make sense of it.

    I’ll be arguing tomorrow that peolpe should use DST not DSP (for now).

    Cheers,
    M

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  9. Evan Foster says:

    Thanks for a well-written article. Well done!

  10. Robin says:

    Great Article, follow by great comments. Most notable to me is the one posted by Nick, solid.

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