Overview of Demand Side Platform (DSP) in China
After arriving to China in 2012, DSP has gained popularity among advertisers due to its way of changing the traditional advertising buying model, from media buying to target audience buying. It lets advertisers see their ads performance more intuitively, allowing them to change promotion strategies more efficiently. As one of the main trends in the digital advertisement development , there is no doubt that DSP will play a more important role in China’s digital marketing scene.
What is DSP?
Demand side platform (DSP) is a system that provides the technology needed to unlock the value of real time bidding (RTB) information provided by ad exchanges. There are thousands of advertisers on the Internet trying to promote their products with high-quality media, precise target audience, optimized advertising strategies and high ROI (Return On Investment). In simple terms, DSP is a service platform for advertisers, in which they can set up target audiences, delivery area and biding price etc.
RTB and Ad exchange
Real time bidding (RTB) is a digital ad buying process that allows advertisers to evaluate and bid on individual impressions. Let us pretend that the Internet is a big cobweb, where users leave traces when they are surfing on it. By using this new technology, advertisers can take all this data into consideration, and then decide the site, placement and bidding price on each ad impression. Usually, this process is completed in 120 milliseconds.
Ad exchange is like an open online advertising marketplace that lets publishers and advertisers connect with each other. You could think of it as a stock exchange; however, it works by auctioning each impression to the highest bidder.
What are the advantages of DSP?
- Wide reach: There is no limit of time and space, advertisers can show their ads when they want to show them and to any target audiences.
- Low cost: Unlike traditional media ads, DSP uses programmatic buying and charges by CPC/CPM, which gives advertisers more flexibility with their budget.
- Specific target: With the Data Management Platform (DMP) of DSP, advertisers can easily target their potential audience according to different characteristics (like age, gender, place, income, etc), this makes advertising more accurate and cost-efficient.
Challenges of DSP development in China:
- Lack of transparency
Many Chinese DSPs do not provide full transparency and access to their platforms, which makes it hard for advertisers to understand and optimize their marketing strategies. Usually, they just provide a report for advertisers after one promotion. As a matter of fact, some DSPs cannot even guarantee the stability of the system because of the lack of technical ability.
- Quality of media resources is hard to define
Usually big publishers just release leftovers from their inventory to ad exchanges, while they build their own private exchanges with premium resources. For example, Baidu, Alibaba and Tencent all have their own private marketplaces, through which they sell these good ads resources to big clients at a higher price. So advertisers who want to work with DSP in China have to work very hard to find the high quality traffic.
- Accuracy of target audience is uncertain
Big companies like BAT (Baidu, Alibaba and Tencent) are reluctant to share their data, and there is no mature Data Management Platform (DMP) in China yet. So most DSP companies just gather data from their own ad network, third-party ad serving, or existing software, which makes the accuracy of target audience data rather doubtful.
What is a suitable DSP?
There are four features a good DSP should have:
- Appropriate RTB capability: A good DSP must be able to decide whether to participate in the auction and what is the biding price for each impression in real time.
- Appropriate directing capability: A good DSP should have a huge Data Management Platform (DMP), through which advertises can target potential audiences more precisely.
- Appropriate data analysis capability: Be able to provide, analyze and optimize reports for advertisers, which are the most valuable part of a good DSP.
- Appropriate technical capability: A successful campaign on real-time bidding (RTB) system depending mainly on the algorithm and matching model of a good DSP.
This article was edited by Andres Arroyo from 2Open.