Time warp back to my original post and you will see this is on the list of things to come in 2010. Its difficult writing this blog because all of these insights and thoughts are coming from the waves seen in the US and Europe but have yet to land into the complicated shores of APAC. Having said that the blog tends to read in some cases to the experienced and then leaps back to the layman’s speak. This is simply because whilst we see undercurrents in our other geographic regions – we are not seeing them transpire overtly into our region. The only caveat to that is Australia – which naturally through history flows alongside at a slower pace to the UK.
So whilst Australia is seeing the start of the DSP movement, the rest of APAC is hearing only murmurs.
Let’s start with the obvious:
1. What is a DSP?
Simply put its a demand side platform – so essentially its a value chain member of the advertising process that allows advertisers/agencies ( the demand side) to utilise their platform (UI) and directly buy ad inventory.
Currently the most prevalent value chain we have in advertising in APAC is:
That is actually not so horrendous compared to the ones seen in the US or Europe:
Actually the one in the states is even more complicated but let’s be a little more simplistic for now. I don’t want to scare you whilst this blog is to slowly show you the progression we’re seeing in the US.
APAC as expressed previously is slower at adoption of new ad technologies for vast number of reasons but its various cultures, adoption of the internet, varied levels of socio-economic adoption and infrastructure make it difficult to close the gap that we have with our US counterparts. This is not to be seen negatively but in fact this is an opportunity for APAC to leapfrog concepts that the US tried and tested and failed. Remember WAP? Who really used that? It was supposed to the new aggressive adoption to ecommerce. It failed in the US and in Europe. Amazon spend thousands of dollars creating a wap site that was never utilised.
So as you can see from the US value chain – you have many parts moving but do all need to be there? Its crowded fragmented and with every value chain getting a cut of the advertiser pie – pretty much a scrap heap business. Why is the business side so inefficient when the technologies evolving are so efficient?
Well when the value chain is willing not to change then an outsider has to force the change to bring about efficiencies. Let’s think back to when ad exchanges were new. Right Media (RM) scared many ad networks because the competent ad network knew that the RM platform was agnostic, efficient and very price accommodating along with specific targeting. Ad networks heralded it with a stick and a carrot- great for co-opetition with their rival ad networks to buy and sell inventory but the stick was there because eventually the smart advertisers would want to use RM directly and cut out the middleman ad network.
Did it really happen?
Not really….. because this new technology came with price sensitivity but lack of sensitivity to brand campaigns as RM gave greater transparency then previously but not enough to know exactly where an ad was being served (the last publisher). RM learned quickly and came out with great products to help but the advertiser or media agency was not convinced and with Europe sticking to their IASH code of conduct were reluctant to adopt so quickly.
Then there’s the argument that media agencies are more driven by creative execution and not as much by ROI and the mentality shift is difficult between the two – so media agencies whilst interested in ad exchanges were not adopting the need to change. Resistance eventually is futile because the DSP was born.
A DSP is ill defined by all accounts and to my mind should be all of these:
* Have self service UI that is accessed by all with same functionality (should not have any managed services)
* Agnostic to inventory
* Have multiple level of ad exchanges to buy from
* Have ability to buy from all exchanges by RTB (real time bidding explained later) so there is a true global frequency capping.
* A DSP should be cost transparent – exactly what you paid for the inventory should be visable
* A DSP should make all inventory biddable – in other words should not buy bulk buy inventory but should let the market dynamics work.
These to me embody a true DSP -but there is much argument about this and the real interpretation is upon the one using a DSP. Ask the right questions before you get into bed with a DSP – it has to be the right one for your publisher/advertiser business.
2. Why has DSPs become some important or at least are so in vogue with the ad world today?
Well honestly its all about price and efficiencies.
Cloud computing is getting cheaper and now that the worlds first ad exchange (Right Media) has been so successful (remember success is measured in many ways but the best is when competitors are threatened and create their own exchanges!) – the next step is efficiency through real time bidding.
Real time bidding or RTB is when you are buying and selling inventory in real time. Right Media has been doing this for many years -it just has a delay in the auctioning due to the sheer volume of bids. Remember RM does not bid bulk inventory but every single impression goes through an auction – its volume is enormous and due to this there is a delay of an hour or so.
Does an hour make so much difference?
Depends who you ask – essentially right now my answer is ‘ NO’.
Well because the sheer scale needed for RTB is crazy – let’s ask a rhetorical question… if RTB is so important and so easy why has RM not done it?
Its because of scale – think about the strain on all the systems in processing millisecond information back and forth and the decisioning and predictive process that determines if you want to buy or not buy a specific impression – then couple that with all the targeting and BT and you’ve got a complicated decisioning tree that looks like a spaghetti junction.
If this is true then why are DSPs so in fashion?
Marketing and because so many value chain members feel they missed some sort of technology boat with the ad exchanges. Then you have the real hard core facts that DSPs are demand facing – they are actually marketing directly to advertisers and essentially given the need for advertisers to start engaging with their audiences directly – most feel the need to be closer to their audience and a DSP offers them that coupled with the ability to buy from many sources as possible with price efficiency. I mean why pay 100 bucks to an agency only to see 15 bucks go the agency, another 40 to an ad network and then another 45 to the publisher. The advertiser by using a DSP only has to pay 45 bucks in this scenerio (obviously depends on price and demand/supply) – it comes back down to the famous ROI.