Understanding DSP, DMP, and SSP in Ten Minutes
First, you need to have at least a basic understanding of the internet advertising industry chain.
Advertisers clearly refer to those who want to advertise their brands or products, such as BMW, Intel, Mengniu, etc.
Publishers are the carriers that provide advertising space, such as TV stations, websites, magazines, and buildings.
Agencies essentially act as intermediaries, helping advertisers find media advertising space and helping media find advertisers.
Audiences are another crucial part of this industry chain, referring to those who consume advertisements.
Where there is supply and demand, there is a market. When the market emerges, small and medium-sized websites that have advertising space but are “not favored” realize that going solo will not yield business, but uniting together makes a difference. Multiple small and medium-sized websites can present themselves as a whole to advertisers, saving advertisers the trouble of negotiating with each website separately and adding value for them. This is a good idea, but how these small and medium-sized websites unite, who negotiates with advertisers, how to set prices, etc., are all very troublesome—without a leader, it is simply not operational.
A concept known as Ad Network has emerged, such as Mobvista and Avazu, which helps establish standards and methods for publishers to unite, represents these publishers in negotiations with advertisers, and also negotiates prices with advertisers, providing pricing that is acceptable to both parties. Publishers willing to join the Ad Network just need to sign an agreement to comply with the rules; those who are unwilling are not forced. If an advertiser has advertising needs, they send it to the Ad Network, which then distributes the advertisement to various suitable publishers. After the advertiser pays, a significant portion of the fee is allocated to the publisher, while the Ad Network retains a portion as its “service fee.”
The advertisements done within the Ad Network differ from those negotiated directly with a large website; the former is more suitable for charging based on CPM or CPC, while the latter in China is generally charged based on time (CPD). The emergence of Ad Networks has been widely welcomed, to the extent that some large websites also join Ad Networks, as they always have some long-tail advertising spaces that cannot be fully sold, and now they finally have a monetization channel. Ad Networks, like Mobvista, are doing quite well in China.
Publishers may have some complaints about Ad Networks, as the pricing power is not in their hands. On the other hand, advertisers may complain that the advertising spaces provided by Ad Networks mostly consist of long-tail traffic, which is not very good; they spend money but receive imprecise traffic and insufficient target audience. There are often multiple Ad Networks in the market, leading to an overwhelming number of various intermediaries between advertisers and media (publishers).
Since there are problems, there must be a market for solutions. Another concept has emerged, known as Ad Exchange. Many people do not actually understand the difference between Ad Network and Ad Exchange, but they are fundamentally different things.
Unlike Ad Networks that unite publishers, Ad Exchanges not only unite publishers but also bring together Ad Networks, which are collectively referred to as the “supply side.” However, besides the advertisers themselves, the agents of the advertisers’ advertising business are also the demand side of this Ad Exchange.
The advanced aspect of Ad Exchange compared to Ad Network lies in its pricing mechanism. Ad Exchange provides a “highest bidder wins” mechanism for each item (here, the item refers to advertising space).
With the development of technology, Ad Exchanges have become increasingly flexible and powerful. Real-time bidding for advertising space is referred to as Real Time Bidding (RTB). Real-time bidding is generally priced based on CPM or CPC, depending on the number of times the advertisement is displayed to the audience or the number of times the advertisement is clicked. If both you and I are interested in the same advertising space, and I am willing to bid $3 per click while you bid $3.1 per click, then you will acquire that advertising space.
Advertisers now face a dilemma; Ad Exchange and RTB seem incredibly powerful, but using them is not only cumbersome but also involves a significant learning curve for bidding. Moreover, there are multiple Ad Exchanges in existence. Even more daunting is how to determine whether an advertising space has the target audience I need. Even more daunting is that the inventory of advertising spaces across various Ad Exchanges is astronomical; searching and bidding one by one would be exhausting and time-consuming.
A concept called DSP (Demand Side Platform) has emerged to help advertisers navigate Ad Exchanges as intermediaries (agencies), and it essentially serves this purpose.
Thus, DSP has become an intermediary that connects Ad Exchanges on one side and serves advertisers on the other, similar to agents managing the funds of retail investors, using their expertise to select stocks and maximize profits for these investors. It is said that the number of DSP vendors in China has exceeded 60, with many Ad Networks transforming into DSP businesses, such as Mobvista mentioned earlier.
DSP may have audience data, but many do not, or if they do, it may not be comprehensive or accurate enough. So what to do? Another specialized provider in the market has emerged, known as DMP (Data Management Platform). Simply put, data management platforms hold audience data and can connect DSPs to utilize all their data.
For the same reason, the supply side (publishers and Ad Networks) also has a concept called SSP to help them manage relationships with various Ad Exchanges and provide a more consistent and integrated advertising inventory management environment. SSP stands for Supply Side Platform. However, in China, there are virtually no true SSPs; media companies generally bypass SSPs and connect directly to Ad Exchanges for various complex reasons, which will not be discussed in this article.
The above basically outlines the current landscape of the internet advertising industry chain. You may ask, how does this relate to my analysis and optimization of internet marketing promotion? Indeed, the purpose of providing a big picture is to illustrate the finer details within this landscape. For example, one question is how DMPs acquire audience data, i.e., how they can know what kind of people are behind a certain advertising space.
At this point, you should understand what advertisers and media are, as well as what the target audience is. You should also understand that there are many advertising agencies between advertisers and media, with various forms, among which Ad Networks and Ad Exchanges are very important, along with DSPs and SSPs attached to Ad Exchanges. You also learned about various payment methods for internet advertising, including payment by date (CPD), payment by advertisement display (CPM), and payment by advertisement click (CPC), and finally, a more advanced method, RTB.
Author: Chris Huang Source: Zhihu
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