A demand-side platform (DSP) is a system that allows buyers of digital advertising inventory to manage multiple ad exchange and data exchange accounts through one interface. Real-time bidding for displaying online advertising takes place within the ad exchanges, and by utilizing a DSP, marketers can manage their bids for the banners and the pricing for the data that they are layering on to target their audiences. Much like Paid Search, using DSPs allows users to optimize based on set Key Performance Indicators such as effective cost per click (eCPC), and effective cost per action (eCPA).
DSPs are unique because they incorporate many of the facets previously offered by advertising networks, such as wide access to inventory and vertical and lateral targeting, with the ability to serve ads, real-time bid on ads, track the ads, and optimize. This is all kept within one interface which creates a unique opportunity for advertisers to truly control and maximize the impact of their ads. The sophistication of the level of detail that can be tracked by DSPs is increasing, including frequency information, multiple forms of rich media ads, and some video metrics. Many third parties are integrating with DSPs to provide better tracking. In addition, DSPs have begun to use advanced price reduction algorithms, commonly known as bid shading, to help advertisers procure ad impressions for a lower CPM in the first-price auction.
DSPs are commonly used for retargeting, as it is able to see a large volume of inventory in order to recognize an ad call with a user that an advertiser is trying to reach. The percentage of bids that are won over the bids that were submitted is called a win rate.