Is A Demand-Side Platform The Future Of The Ad Network?

Data-Driven Thinking"Data-Driven Thinking" is a column written by members of the media community and containing fresh ideas on the digital revolution in media.

Today's column is written by Ajay Sravanapudi, CEO at LucidMedia.

Demand Side Platforms (DSP) are hot! I can tell by the huge agency interest, and even more eager venture capitalists anxious to get in on the latest craze. Traditional ad networks and newfangled technology platforms are declaring themselves to be DSPs. Others who did much of the evangelical spadework for DSPs appear to be stung by the sudden rush. There is now an attempt to define a "true DSP". At this stage, a "true DSP" as defined by a list of features serves little purpose and is as much a disservice to the industry, as it is disconnected from reality. In fact, many of the current DSP competitors—those with the most significant solutions already in-market—are successfully violating that definition of a "true DSP" to the benefit of their agencies partners.

The truth is that a "fully self-service DSP" would be far too disruptive to most agencies at this early stage. There are far too many levers, knobs and buttons in a DSP robust enough to deliver the optimum cross-section of pacing, performance, and price for an agency to take on today. They range from mundane tasks like dealing with objectionable impressions and buys from non real-time sources to more arcane optimization tasks, RTB source integration, bidding strategies, discrepancy management, and post-campaign reconciliation.

As my own company has learned by providing DSP services to agencies over the past year, agencies are still not appropriately staffed to be full-fledged buy-side networks yet. Media buyers are already over worked and stretched to the limits and are looking for a DSP to do more with less. That means automating many tasks but also off-loading just as many (if not more). A managed service that facilitates knowledge transfer and leads to a semi- self-service approach is far more realistic today. The reality of the situation is simply not that black and white! At the end of the day what an agency really wants is to know what works for their clients and how to repeat those outcomes in the future. At least that’s been our takeaway. They want the data behind the performance, the audience segments that engage with their message effectively, and the easy-to-pull levers that will let them do it again on the next campaign. They want no more and no less.

It is also important to recognize that many of the most important DSP offerings are coming from the networks where the technology has matured and has been thoroughly field tested. Indeed, my company falls into this category. The networks already have the relationships and business models in place to support the early adopters. Real-time bidding is an excellent example of this necessity. To get multi-source RTB going at scale going takes a significant amount of relationship building and technical heavy lifting and many of the networks have already invested heavily in this. Discounting the network players with a single stroke, and leaving it all up to the agencies, is doing the industry a massive disservice.

There are many other aspects of a "true DSP" that were missing from the recent list as well. Our experience has been that no DSP should leave home without staples like universal frequency capping across exchanges and publishers, objectionable content filtering for brand safety, some sort of automated optimization for CTR, CPA, or eCPC and the ability to plug in others, an advanced and robust ad server capable of propagating campaign changes in minutes, seamless targeting of audiences with native and 3rd party data, and granular content targeting independent of site or section.

Only time and buyer requirements will define the "true DSP" and decide if networks and DSPs can truly coexist. The industry needs time to shake it all. The sector is too young to define the full product category or for one player to define it completely. I will conclude with a heretical prognostication – the next generation of ad network will be a hybrid DSP solution with a service layer.

Follow LucidMedia @lucidmediaVIP and AdExchanger.com (@adexchanger.com) on Twitter.

11 Comments

  1. I really appreciate this post. Right on the money. I enjoyed the post about a "true DSP" and thought it was an interesting list, but I agree that it is way too early to say what a "true DSP" is. I don't think there will ever be a time of a "true DSP." Hybrids will atop hybrids and create new sub-categories, etc. Ajay is very correct that today's networks are the earliest adopters of DSP technology and will be the one's too push it the furthest. Anyway, saying "true DSP" is like saying "true stock buying." Lastly, if we keep up the stock market metaphor we all love to use in this space, do you really think the self-service platform players like E-trade, Schwab, etc don't keep a little inventory on their own shelves of the most premium stock for a little extra margin? Who cares? I still enter my bid with a Limit Order. I really don't think a DSP has to have a tech fee model to be a true DSP. Do we all think the agencies will use DSPs and transparently pass on the savings to their clients? Oh wait, let's not forget why they want their own seats.....more margin!

    Reply
  2. Joanna O'Connell

    It's a 'modes of thinking' question here. While it may be the case that some agencies don't have - or choose not to have - in their DNA both the desire and the ability to own the process every step of the way, there are others who absolutely do. Those agencies recognize that there is value (to both the agency's business and to their clients) in owning - not just understanding at a high level - every step in the valuation, purchase and reporting against their clients' ad spend. Vehemently agree that things will continue to evolve. Not sure though that your prediction for where they'll go is truly the best outcome for our clients.

    Reply
  3. Karin Blake

    If agencies outsource all the hard (and even the mundane) parts of this new way of media buying, what's to prevent advertisers from just outsourcing it directly themselves, even in the short term? You would think that with the increasing pressure on agency margins, creating new ways to justify the value to clients would be the priority, rather than decreasing the in-house skill set even further. Agreed, there is a lot of work to be done by agencies, but to suggest that most want to/should take an easier way out seems a little short-sighted.

    Reply
  4. Taking the Dis out of Display

    Great post. I would take Ajay's point one step further and suggest that the agencies will always rely on a robust services model from their technology partners--some might develop more expertise in-house off of their trading desks, but they will never be technologists themselves. Their core value is in using technology and then pulling the intelligence out of the data to share back to their clients. They can then help them make informed decisions on future marketing spend (spend more!).

    But back to the question of marketers by-passing the agencies. Depending on where you sit, you are either a beneficiary or a victim of the way most businesses approach marketing. Leaving aside the obvious exceptions, most companies don't consider marketing the highest priority. Marketing departments are usually the first to get cut when things go bad. The agencies will always have a formidable place in the advertising world b/c companies for the most part can't and don't want to handle it themselves--it's just not why they are in business.

    While some companies, like the credit card companies, already have the marketing sophistication and technology skills that far surpass their agency partners, they still have their agency relationships to help in either execution or getting at other goals. It's really the 99% of the advertisers who aren't in that category and will never be capable of bringing it in house, however simple the self-service platform becomes (and I'm not sure it will ever be that simple).

    They key the agencies hold is the view across all marketing channels, the decades of experience in communicating with audiences, the creative element (yes, some of the magic).

    The advertiser will need their agency partner to speak to them in the language of marketing and advertising. The agency will in turn need their technology partner to speak to them in the language of optimization, targeting, real-time bidding, etc..

    The agency will be the bridge between the advertiser and the new technology platforms. Even in a world where the "advertising vending machine" sucks in a dollar and spits out the optimal campaign--right ad, right channel, right time, someone will have to explain to the advertiser why that dollar was well spent and what it actually means to their business and marketing objectives.

    Having a service component adds to the value of these platforms at this early stage, but will be a necessary long-term piece as well. In advertising, the platforms will take the inefficiencies out of the processes that need it, but that won't be everything.

    Reply
  5. A. Poster

    Karin's on to something. Here's a checklist. You're a DSP if you:

    - get I/Os from clients at fixed CPMs but with CPA goals
    - turn around and get access to inventory and try to make it perform
    - get paid for your efforts via arbitrage or a % of spend-based fee

    Oh wait. That makes you an agency. Er... or a network. Wait... this all seems vaguely familiar.

    Reply
  6. Great post Ajay, I think you are right on quite a few levels. It is going to be a fun year for all of us as this all shakes out. And btw, I for one am not stung at all by everyone copying us. This is awesome to see so much excitement around our space.

    Reply
  7. Ross Bradley

    All segments of the industry may well be unknowingly waiting for some clear and decisive direction to be handed out on a good number of issues. This will only come (I feel), following the approval (by the DOJ) of the Microsoft - Yahoo search and advertising deal. Progress can then be made at a greater pace.

    There is a need for much stronger leadership to be shown. Many will be dragged into line by the scruff of their necks or, will be doomed to fail as scale will ultimately be the answer for many. It should be pretty obvious as to where that will be coming from and with it, a case of 'shape up or, ship out'.

    Reply

Add a comment

XHTML: You can use these tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>