The future of in-house DSPs : trends and predictions

By Delphin Varghese

The concept of programmatic rose to prominence in the past year and ever since, there have been countless brands who leverage this marketing automation tool to stay ahead of the curve in this ever-evolving digital landscape. In essence, programmatic refers to the data-driven approach to buying and selling of digital advertising space by utilising real-time bidding (RTB).

Contrary to the manual media buying process, programmatic deploys software and algorithms and acts as a centralised platform to access multiple publishers at once and purchase impressions via ad exchanges.

A programmatic ecosystem has the following key components:

Advertiser: Ad buyers who deploy DSPs (Demand-side Platforms) to acquire ad space in order to reach out to their target audiences.

Publisher: Individuals or entities who own or manage digital properties like websites, apps, etc. and sell ad spaces to advertisers through SSPs (Sell Side Platforms).

Ad-exchanger: Digital marketplaces that bridge the gap between SSPs and DSPs and help buying and selling of ad space. The ad prices are determined by real-time bidding.

DSP: Software used by advertisers and agencies to buy ad inventory across multiple platforms from a centralised location.

SSP: Publishers can sell their ad space to advertisers in real time using this platform. This platform allows publishers to exercise greater control over their inventories and CPMs (Cost per thousand impressions). It incorporates DSPs, ad exchanges and other networks. Publishers can monetise their ad inventories using SSPs.

What are Demand-side Platforms (DSPs) and Why are they Important?

Imagine a scenario where advertisers had to reach out to thousands of publishers manually DSP is a marketing automation tool that leverages programmatic advertising to facilitate buying and managing ad inventories across multiple ad exchanges and Supply Side Platforms in real-time.

DSPs gained widespread popularity in 2007 when the advertising industry witnessed a shift towards RTB (real-time bidding). Traditional advertising methods entailed ad buyers manually reaching out to individual publishers and other ad space providers and negotiating the prices of the inventory for ad placement. The automation of this entire mechanism has been fueled by real-time bidding.

The Importance of DSPs lies in the fact that they accelerate the ad-buying process by eliminating manual labour. The automation mechanism not only enhances the efficiency of the process but is also more economical. As DSPs streamline the real-time ad buying process, specialists can redirect their focus to essential tasks that necessitate human intervention, such as refining user base segmentation to maximise ROI.

DSPs also equip mobile advertisers with the ability to manage campaigns in real-time which subsequently diminishes the risk of losses by swiftly eliminating the underperforming ones and scaling successful campaigns.

Though the market outlook for DSPs is erratic, the industry is anticipated to surpass the 92$ billion mark by 2029. Here are a few compelling reasons why companies should start prioritising the development of in-house DSPs.

1. First -party data is growing at an unprecedented rate. This amplifies the need for improved audience segmentation and targeting. This indispensable need for audience management boils down to the development of new technology. In-house DSPs help companies tackle this challenge by leveraging their proprietary data effectively and offering tailored audience segmentation, personalised targeting strategies and precise ad placements. All of these boost ROI and drive better conversion rates.

2. In-house DSPs ensure transparency of campaigns which foster better decision-making. They help advertisers get direct access to campaign data, comprehensive overview of performance metrics and full visibility into the ad buying process which helps optimise the campaign effectively for optimal results.

3. In-house DSPs are the clear winners when it comes to data security and confidentiality. They alleviate the risks associated with third-party access to sensitive information.

Industry Trends Shaping The Programmatic Landscape

The programmatic advertising landscape is ever-changing and this transformation can be primarily attributed to technological advancements and changing consumer behaviour. Here are some trends within the DSP landscape which will significantly impact the future of this dynamic market.

1. AI-driven Optimisation Strategies and AI-powered Predictive Analytics

When it comes to analysing user behaviour patterns and personalised targeting, AI is the one to beat. Ai algorithms churn huge chunks of consumer data and are able to identify behaviour patterns that help marketers deliver relevant ads for better conversions. Besides, AI can optimise creatives in real-time in a way that resonates with the target audience and boosts engagement. Real-time bidding in programmatic works wonders when it comes to maximising ROAS (Return on ad spend).

2. Cross-device and Contextual Cookieless Targeting

With the gradual extinction of third-party cookies, big best are being placed on contextual targeting. DSPs are focusing on delivering relevant ads to the user based on past interactions, website content and browsing behaviour. Cross-device targeting is growing by leaps and bounds and DSPs are expanding their abilities to include the same. This comprehensive approach enable advertisers to manage campaigns across multiple devices and platforms like social media, display ads, video, etc.

3. Greater Emphasis on Privacy

DSPs are placing an increased focus on data protection and safeguarding user privacy, adhering to continually evolving privacy regulations like GDPR, CCPA, etc.

4. Programmatic Audio and CTV

The increased integration of programmatic in audio streaming services is becoming more evident with each passing day. The major motive behind this initiative is reaching audiences on-the-go. Alongside this, CTV advertising is also gaining traction and helping advertisers tap into cord-cutters and cord-nevers with relevant and interactive ads.

5. Holistic Measurement and Attribution

DSPs ensure optimal spend in campaigns by integrating analytics platforms that offer advanced data-driven insights. They help assess the impact of ad campaigns across multiple touchpoints and take informed decisions accordingly.

6. Blockchain for Transparency

Blockchain is integral to steer clear of fraudulent transactions. It serves as the cornerstone of the Smart Contracts feature wherein the program code incorporates the terms of cooperation. This ensures compliance with all the parties involved.

In-house DSPs – A Growing Trend

Building a custom DSP from scratch is not for the fainthearted. The evolution of complex technologies has made DSP development a pricey affair. In a market crammed with competition, building an in-house DSP, especially for those venturing into the AdTech market is extremely challenging. The fact that merely 18% of advertisers have an in-house full stack programmatic RTB (according to IAB), is a testament to the fact that building an in-house DSP is not a child’s play. The global programmatic advertising spend witnessed a $64 billion upsurge from 2022 to 2023. This statistic suggests that now might be the opportune moment to allocate resources towards building an in-house Demand-Side Platform (DSP).

Pros of Having an In-house DSP

Long-term cost reductions in media buying by cutting out profit margins associated with external DSPs.

Improved ad performance and precise targeting owing to comprehensive customisation options

Unlock new revenue streams by selling white-label DSPs to other brands.

Easy integration with in-house software

Transparency and greater control over data processing and management.

Cons of Having an In-house DSP

Necessitates solid financial backing for both development and ongoing maintenance.

Lengthy development cycle- Can take up to 1-2 years for the DSP to be actually deployed.

Investing an abundance of time and money in hiring specialists, adtech engineers, testing algorithms, etc.

Having a pre-established credibility is a must in order to foster good relationships with major ad networks and exchanges.

What Does The Future Hold?

With more and more businesses inclined towards internalising their programmatic advertising operations, the future of in-house DSPs seems promising. Technological advancements can equip companies with the necessary tools to develop custom DSPs that cater to their unique needs, are cost-effective and offer greater control over campaigns. They facilitate better integration with internal systems which subsequently streamline the data flow and analysis.