OPINION - Do programmatic buyers even need a DSP anymore?

*Lots of news about the role of an SSP recently, so I thought I’d share my thoughts on the future role of a DSP*

In my first digital advertising job I was responsible for uploading advertisers’ creative assets into an ad-server (primarily DFA… now called Campaign Manager 360) and then sending out ad tags to large publishers and ad networks to implement within their publisher ad-servers to deliver campaigns. I would report on the delivery from the ad-server itself and on occasion I’d optimize the creative in the ad-server and monitor ad impression delivery.

My role then evolved into planning, where instead of sending out ad tags and checking on delivery, I would negotiate deals with publishers and networks which were inclusive of targeting criteria and campaign objectives and I would sign documents confirming the deals (much better media lunch options in this role than ad trafficking!).

Then programmatic came to be. Demand Side Platforms aggregated the vast volume of publishers and ad networks (some became SSPs) where transactions could happen in near to real-time. The process was seemingly operationally more efficient but in the early days there was little transparency as to at what cost.

Now, with the benefit of hindsight and more willingness to talk openly about fees, we know the supply chain is loaded with many costs. Yes, the term ‘ad tech tax’ is grating, but ad tech serves (and will continue to serve more of) a purpose which should be remunerated, but to what extent?

What I find most interesting is where cost should be incurred based on the evolution of the buy models. You see, using the above buying scenarios you quickly recognize that the aggregation of supply in an open market scenario (and even more so with the advent of header bidding) will incur significant infrastructure costs – it isn’t cheap to listen and decision on billions of requests for hundreds of advertisers. But what if the industry moves more towards ‘upfront’ or ‘direct buys’? Is there any need for any of this AdTech? Could we see a world which goes back to an ad-server to ad-server transaction?

Let’s quickly go through each of the use cases of why a DSP is needed today (I’ll likely cover SSPs at a later date) and whether ad-server to ad-server transactions are better or worse than using a DSP.

1 – Frequency capping

The DSP can frequency cap across all media buys (that are bought within it) at an advertiser level – this is incredibly useful but maybe redundant in a world where cookies go away (I know there are first party IDs solving for this, but will they stand up to questioning from the anti cross-site tracking police – time will tell)? Frequency capping at scale (i.e. across all partners) will probably exist within the browser, and if that happens then a DSP is not needed for this in future.

2 – Data-driven buying

Similar to the above, an advertiser can load in their first party segments and target them across a broad range of publishers without having to setup 1:1 deals. This is likely to go away as clean rooms and browsers have theoretically a more privacy compliant way to do this.

3 – Operational efficiency for media buying

I shudder when I think about the amount of time I used to spend at the office printer printing, signing and scanning back IO’s with publishers and ad networks. DSPs do improve this process but arguably for the tier 1 partners not to the same cost-efficiency as a couple of junior hires can (i.e. 10% DSP fee on $10million of spend seems ridiculous for this process). I wrote about this in 2015 and programmatic guaranteed DSP pricing has changed since, thankfully! In a world which becomes more direct or PMP driven and less open exchange, there is less of a need for a DSP.

4 – Aggregation of the long tail

The globe is full of a lot of publishers, ranging from small to huge, and local to global. Setting up deals with all of them to reach an advertisers audience is tough. However, the DSP isn’t the one with the publisher relationships and contracts, the SSP is. Going direct to an SSP, sales house or sell-side intermediary layer may be a more cost-effective way to access supply, or even going direct to the publisher.

5 – Optimization & reporting

DSP optimization is powerful. Having the ability to optimize across multiple publishers, placements with different targeting criteria, in essentially real-time is something which can’t be done manually. Optimization features in DSPs will continue to add value and will continue to expand as they open to selected third parties (such as custom algos). However, if it’s just to activate spend to a specific publisher, you don’t need much optimization or reporting at all.

Summary

It’s unsurprising to see publishers and SSPs building out their own offerings to avoid paying a DSP fee and it’s equally unsurprising to see DSPs trying to find more direct ways to access publishers. As always, there are pros and cons.

My recommendation is that when a buyer is considering using a DSP the question isn’t ‘which DSP should I use?’ it’s ‘should I use a DSP?’. Start with the use cases and build your ad tech strategy around that – I think the answers might be surprising!