Demand-side platforms, or DSPs, work hand-in-glove with advertisers, media buyers, and trading desks, offering them a window into mobile audiences.
DSPs have become increasingly influential within the mobile advertising ecosystem. (Recently, Adfonic, a well-known ad network, launched a mobile demand-side platform of its own.)
Alex Rahaman, CEO of DSP StrikeAd, sees DSPs as an increasingly indispensable link between agencies and ad inventory. Fusing real-time bidding technology and expertise, DSPs can streamline ad buying and ensure that the demand-side gets the best deal possible.
Q: Can you give us an overview of demand-side platforms such as StrikeAd and how they fit into the larger mobile advertising ecosystem?
Let’s start with the fact that big publishers have generally been a bit slow to the mobile party, so mobile had grown out in a distinct manner. Media consumption has been fractured across all sorts of smaller social networks and mobile sites that sprung up and did well. And then we saw the app ecosystem explode — and that took a large share of media consumption. So these small sites and apps, which did not have ad sales forces of their own, began to work with what became known as mediation platforms. These platforms are basically aggregators of lots of sites and apps, and they powered the early mobile ad networks that arose. What you effectively had in the early days of mobile was different mobile ad networks competing to secure inventory. This model, where a buyer goes to a supplier who aggregates lots of sites and apps, has been very important in mobile. So when I started StrikeAd in 2010 we went one stage further: We became a DSP (demand-side platform). The difference between a DSP over a mobile ad network model is the DSP’s relationship with the buyer.
Q: How does that relationship work?
So what the buyer — the advertiser, the ad agency, or the trading desk — wants to do is to buy exactly their desired audience with the minimum wastage, and at the best price. The agency doesn’t really want anything else but that. The DSPs are on their side helping them do that. Then, on the sellers’ side, you have the ad exchanges, which are trying to do something similar but working with the publisher, trying to find as many buyers as possible, to make the inventory as attractive as possible, and get the price up. So we’re heading toward a much more efficient market where things are very clear. On one side there’s the buyer, and the DSP — and on the other the seller and the SSP (supply-side platform). Auctions also make the market more efficient. The auctions are a new piece where real-time bidding comes in, which is a process where we take each unique ad impression available in the exchange, we decide if we want it, and very quickly make a bid on it. Most importantly, we track if the user interacted with the ad, and learn whether to buy more of that media or those users. Over the course of the campaign we’re always optimising and reducing wastage.
Q: What are the technologies and innovations that have made all of this possible?
There have been three key innovations in the mobile ad space, and we’re a part of each. First there’s the emergence of DSPs to represent buyers’ interests. Second would be the buying of mobile ads with real-time bidding. And the third innovation would be the creation of a mobile cookie that you can use to track users that appear in the SSPs that we purchase from. As a buyer, you can now identify a user who used a certain site or an app, and made — or nearly made — a purchase, or showed some prior interest in your brand. We really want that user. We’re going to pay more for that user. That’s really something that was absent from the mobile DSP space until StrikeAd developed its mobile cookie.
Q: What about the traditional mobile ad networks. It sounds like they’re caught between the ad exchanges and DSPs. Will they continue to have a role?
It’s a good point. The same dynamic is being played out in the Web space. Basically, I think there are ad networks, and then there are ad networks. If you’re an ad network offering no transparency and no premium publishers, then you might be in trouble. You’re effectively taking the margin from the exchanges, but you’re being less transparent than they are about prices. So, for example, some ad networks are launching their own DSPs. The challenge with that route — an ad network becoming a DSP — lies in relying on your own publishers. Then, part of your business acts like a DSP working for buyers, but the other half — you’re working for the publishers. You’ve made a deal with the publishers that you’re going to make them money. That raises a conflict of interest. Long story short, there is a place for premium ad networks that are transparent and have done deals with premium publishers, and are offering quality inventory. There will always be a place for that. But others might struggle.
Q: Why can’t your clients build the capabilities you offer in-house? What does a DSP offer that’s not replicable?
There are two key things: One is the technology, which is a heavy-duty kit that works on the front-end and the back-end. That has taken a lot of man-hours to develop. It’s a big investment and not one that media agencies are used to making to date. The other is people who know how to make campaigns work and how to create a campaign with many types of advertisers. We know how to succeed, and that’s especially important with a new channel like mobile.
Q: We’re hearing more and more about the importance of real-time bidding and the supporting technologies. Tell us how that works in the mobile space.
We have a real-time bidding engine that connects our clients to billions of individual ad impressions a month. So, let’s say you walk down the street and you’re about to go to the page of an app or a mobile site. The app or site is represented by a supply-side platform and the SSP pings us — this person is at this location, on this site, on his phone, about to see an ad. Do you want this ad? That represents a technological challenge, so we have to do a few things. One, we have to receive all those pings and you need high-load servers to deal with that sort of volume. Two, you need to then process all those billions of little bits of data in real time. Three, you need to run it through a database. Then finally you need to have an algorithm that says — yes we want that person, and this is what we’re prepared to pay – and send it all the way back to the exchange.
Q: In other words, you’re targeting specific users in real-time. How do you know on your end if it’s a user you’d like to have, or that you have a history with?
We also have an audience database, which will say: These are users we know, and this is what we know about them, or — these are the users we want. Then our data has to fire back, through the same process I’ve described, out to the SSP with the ad, with the price, in a hundred milliseconds. And if the bid is successful, we deliver the ad. These are very, very high scale servers and we use very efficient computing languages to improve performance. We have to process things very efficiently, very quickly and also have the server capacity to be able to process it. But this wouldn’t amount to much if we didn’t have the media to bid on. So we need to integrate with as many ad exchanges as possible. For example, from advertisers’ perspective, if you’re a car company, with one exchange integration, you’d be missing out on potential users in the U.S. at a given time in a big city. You need to have as much inventory as possible available to you. The other important piece is that we have a platform that some clients can actually licence and their own staff can manage the process. That’s very rare in mobile.
Q: This is obviously an innovation-driven business. What other breakthroughs are on the horizon?
There are two key innovations that will be incredibly powerful. One will be the linking of unique users across different devices. There’s somebody who’s been on your website, and then they check it out on their phone through the course of a day. That is very powerful. You’ll understand that if you spend a budget on one device, there’s a return on another device like a TV — or via an iPad campaign. Linking across devices is a challenge now, but it’s a problem that’s going to be solved. The second innovation will be to rethink mobile as a commerce route, a way to drive people into stores and to get people to pick up their phone to call, to actually sell more product. It’s a device in everyone’s pocket that retailers and brands can use to communicate with consumers.
Q: Do you agree with the perception that consumers are still resistant to mobile advertising?
I actually see mobile ads as very effective and statistics prove that. We have anywhere between 0.5 and 2 per cent click-through rates from banners. Now that’s anywhere from five to 20 times more effective than PC banners. People are almost getting blind to PC banners. Video and rich media mobile ads can actually be pretty effective to get the brand message out as well. So more brands are embracing that, and it’s pushing more brands into mobile.
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