How Demand Side Platforms (DSP) Can Help Recalibrate Ad Businesses in 2020

March 27th 2020
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@irinakovalenkoIrina Kovalenko

CMO of SmartyAds

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White label DSP platform gives advertisers a chance to open independent ad tech businesses, set their own conditions and influence the outcomes of media-buying directly, without third-party providers. When advertisers go autonomous and what white-label gives them, let’s take a look.

If more than 42% of budding startups die within the first year because they find no demand for their product on the market, with programmatic business, everything is slightly different. Programmatic advertising has a reputation of a very profitable business — in 2019, the growing share of algorithmic (programmatic) ad spend outweighed all other kinds of media-buying (84% of total digital display ad spend).
According to the eMarketer, in 2020, programmatic ad spend will generate $57 billion, and by the end of 2021, ad spend is supposed to grow to an unpreceded $79.75. This means only one thing: programmatic continues to redraw the digital advertising ecosystem.
Many years ago, Netflix and Kellogg built their own programmatic platform as a way to save a good share of their media costs. Last year, Buyer reported about a complete shift to in-house programmatic that was supposed to make their media purchases crystal-clear and transparent.
If you are a novice in programmatic advertising, chances are you think in-house programmatic is for big businesses like these. However, brands that have tried white-label DSP prove the opposite — this new approach helps to build your own programmatic platform in-house without substantial financial injections and risks.
So, if you're interested in how to enter Ad Tech business, let's make a profound analysis of some core things:
●      What is a DSP?
●      What is a White Label Technology?
●      How it is different from White Lable DSP?
●      How to find out whether you need to step on independent grounds of programmatic?

What is a DSP and why advertisers use it: 3 most important functions

Demand-side platforms automate the process of online media buying and this is their most important function. Technically speaking, it is a software platform that features connections to SSPs, ad networks and ad exchanges and enables advertisers to purchase inventory programmatically, usually via RTB (real-time bidding auction) as the picture below illustrates. 
DSP doesn’t shoot blindly to whatever bid comes its way; it needs a definite set of rules to act upon and advertisers provide the platform with such directions in the user interface. Targeting (OS, gadget, age, gender, zip, channel and more), frequency, budget limitations, filters, etc., — all these criteria take part in the decision-making process.
They enable delivering ad messages to the right audience at the right time and device. They also limit the number of impressions per user to prevent ad fatigue and budget overspending.

Strengths of DSP solution that can’t be found in manual media buying

●      Buying activities automation. As mentioned above, the platform uses the rules defined by the advertiser to automate the purchasing process. Responsible technologies: AI and ML.
●      Cost-efficiency and speed. With automatic auctioning, bid approval and ad serving, there’s no need to negotiate the placements, make credit card transactions for every placement or arrange email correspondence. As soon as the user with relevant cookies opens the page (app), DSP defines the potential worth of the bid and joins the auction.
●      Real-time optimization. Negotiated placement leaves little maneuvering for advertisers to change something about their ad, even if it doesn’t bring a return on investment — the ad is paid for and it’s placed somewhere for a definitive period. DSP platform makes real-time analytics. If something isn’t working, there’s always a chance to change the campaign flow in real-time.
●      Only one person to operate. With DSP, advertiser gathers all campaigns in one place – on one DSP dashboard. Unlike manual placement, the advertiser doesn’t have to attract sales reps or agencies. Everything can be done by one person (self-serve DSP) or a team of DSP specialists that assist managed-serve campaigns (sometimes via ATDs).

What is a white-label technology?

White label concept is a type of partnership where one company produces goods, services or technology and another one purchases it and re-sells it under their own brand.
This way, each partner can focus on their core competencies (production or sale) and thereby save substantial costs, essential for new business launch.

What is a white-label DSP platform?

White label DSP platform enables taking this very same DSP technology in house, which means enterprises can purchase prebuilt DSP software, customize it and label it as their own solution.
With white label DSP, the purchaser of the platform can operate as:
  • A white label DSP reseller: sell DSP services for brands on a commission basis
  • A media-buyer: optimize their own media buying costs
  • An agency: streamline work for clients or provide them with self-serve accounts

Where white-label outruns self-development?

Like any programmatic solution, the demand-side platform is a complex thing that requires building the software system and plugging it all in the vast programmatic infrastructure. RTB, ad server connection and partner integrations are not even making a fraction on the full list of must-dos.
When building a DSP platform from scratch, business owners need to attract the full specter of professionals in many areas of expertise: ad tech professionals, software developers, project managers and q/a testers. Then, they have to wait until the product roadmap slowly turns into a robust, working and market-licensed platform. This can take months, half a year or more (depending on your team).
White-label DSP solution is a pre-built, SaaS-based technology that is already fully hosted, maintained, built with RTB integrations and only requires minimal customization.
This alternative business building approach removes all the burdens of building the platform from scratch: developing, designing, testing, licensing and hiring people to scale it up when the business expands.
Costs. ‘Building your own DSP solution’ is a phrase that already sounds costly. However, if building a platform from scratch may take somewhere between $40,000 and $250,000 (again, heavily depends on your team), the white-label model will make it happen for  $1 000 to $50 000 (pre-made technologies are known for their affordability).

Why do companies look for white label DSP platforms?

White label DSP platforms are gaining momentum because more companies are striving to take their programmatic purchases in-house. By the end of 2019, 38% of advertisers, 66% of agencies and 65% of publishers in Europe had taken their programmatic purchasing in-house.
Why are they doing this? Even though programmatic allows agencies to simplify and automate media-purchasing as much as possible, it still experiences challenges associated with insufficient transparency, also known as a ‘black box problem.’
Some DSPs don’t disclose terms of cooperation, so the agencies can’t deliver to customers relevant information concerning service commissions and margins that DSP charged them with.
As a result, brands see only the total cost of services and are unable to distinguish what they are paying for. By selecting an in-house strategy, 50% of advertisers expect to increase operational control, reduce media costs (42%) and gain greater transparency on where campaigns run (33%).

Do you need to set up white-label DSP?

White label DSP solution enables a simple shift to in-house programmatic media-buying. While self-serve DSP may perfectly satisfy the needs of a small brand, in some cases, business needs may overgrow the basic abilities of DSP. The following examples can perfectly illustrate this point:
Saving money. Exactly, for this reason, buyer brought programmatic in-house and saved approximately $10M during the first 6 weeks. Sure, if your regular media-spend is small, there’s no point to worry about DSP service commissions — normally they won’t exceed 30% per bid.
For instance, if you spend $1000 per month, it will barely reach $300. However, if regular media spend of yours climbs up to e.g. ~$29,000, you will leave $8,700 on the table.
What is a white-label DSP in terms of payment — it is a subscription-based platform that only makes the fee of the generated ad spend. So, if the ad spend is ~$29,000, with a normal 5% fee per month, you give out $1,450 instead of $8,700.
Scaling and avoiding risks. Building your platform with a white label DSP solution enables you to set up a functioning platform in less than a month. Most importantly, it helps to overcome one fundamental business building risks: as the platform is already time-proved and finished, this is a guarantee that technology will be bug-free and robust enough to measure up with big and reputable programmatic platforms.
For some companies, a white-label solution is a chance to join an RTB ecosystem effortlessly, and for others, it is also a chance to scale their platform anytime. The solution is based on the remote servers, so updates, upgrades and improvements will be happening on the background — there’s no need to terminate operation in order to scale capacities.
Ensuring safety and consistency. Customer data protection and advertising fraud are the weak spots of the advertising ecosystem. Brands that accumulate and use first-party data for targeting at times fear that it will flow through a third-party supplier to competitors.
The world has known enough examples of data misuse — Cambridge Analytica scandal is only the loudest of them. For this reason, advertisers strive to independently control user data and quality of traffic (applying scanners and monitoring statistics in real-time).
In order to extend potential reach, advertisers are often pushed to work with several DSPs, which creates another roadblock to effective targeting — bidding against your own bids in different auctions. White label DSP, in this situation, is the best shield against competing against yourself as you track each activity of the system.
Additional strengths a white label DSP solution may have:
  • Ability to connect existing SSP partners via API and obtain their user data
  • Ability to order on-demand features, integration and customization
  • Ability to support the widest range of ad formats
  • Ability to modify the system and integrate external modules via API

Things you should know before building white-label DSP platform

White label DSP platforms are solving a lot of problems that non-proprietary ad tech solutions can’t. Still, can we expect that the advertising industry will completely transition to in-house programmatic in the years to come? On the one hand, big players are massively heading in-house; on the other hand, the number of brands that open their own programmatic platforms and departments is relatively small and there’s nothing wrong about it.
1) Your budget. The reasoning of enormous budgets behind opening your own programmatic platform is nothing more than a common misconception. As was illustrated on the media-budgets example above, if a company doesn't spend a lot of money on media, buys inventory rarely or seasonally, there is no need to buy advertising platforms and run independent advertising businesses. Why would you buy a ship if you only sail once per year?
Plus, there will always be players who follow the model of key competencies and who will not try to embrace innovative technologies or business models just for the sake of it. Before you adopt any technology, you should always ask yourself what problem it is supposed to solve; only then will it bring you profits and desired return on investment.
2) Where to get expertise. Not every advertising agency or enterprise has sufficient experience in the programmatic business. Sure, white label DSP providers will build the platforms from the ground up for you, but the promotion, market positioning and operation as a whole will be entirely on you. Your platform is your business — no one dictates you or patronizes you on what payment model to use, what partners to befriend or where to put the label in the dashboard.
In order to effectively cope with operational tasks and optimize ad campaigns on behalf of their clients (the success of which depends on so many conditions), it is necessary to have programmatic professionals in staff, sometimes entire departments. For this reason, even with the growing popularity of in-house, many companies will still rely on agency experience. The others, meanwhile, select the strategy where the DSP operation process is fully or partially outsourced.

The takeaway

DSP is a complex technological platform that streamlines and effectively automates media-buying. However, construction and launch of it can be very expensive if you build it from scratch.
In addition to costs, you need to invest in development, testing, and platform customization, building your own infrastructure can take the time that otherwise could be spent on conquering a new programmatic niche.
White label concept is an amazing choice if you keep it in mind the idea to start you own business in ad tech and plan to create a branded DSP technology of your own.
For many enterprises and agencies, the construction of a DSP is impossible from a financial standpoint. However, if you spend a lot of your budget on media-buying, then the decision to get your own programmatic solution may look pretty appealing.
White label DSP solves the problems of enhanced fees, insufficient transparency and accountability of the media-buying. It cannot be ruled out that in ten years, technologies like white label will make the programmatic businesses a commonplace for every company.
However, in making such an important decision, every entrepreneur must also give oneself answers to the questions: “What gaps am I covering?”, “Who will be in charge of operations?” and finally “Am I ready to run my own advertising business?”
(Disclaimer: The author is the CMO at SmartyAds)

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