Bright future for DSPs

published on "Campaign"

Interviewee: William Gu£¨head of research and vice-president of hdtMEDIA£©

Campaign: What is a demand-side platform (DSP)? What is its most significant benefit and how important is it to the new ad exchange business model?

William: A demand-side platform is a system that allows digital advertisers to manage multiple ad exchange and data exchange accounts through one interface. Some major features of a DSP include universal frequency capping across exchanges; automated optimization for cost-per-click (CPC) or cost-per-action (CPA); the capability to change campaign strategies in minutes; and audience buying with first and third-party data.

However, the most significant benefit of DSP is that it allows its users to buy audiences using realtime bidding (RTB) technology ¡ª either programmatically or through a user-friendly interface. By doing that, advertisers can improve campaign ROI; make it more efficient to set up or modify a campaign; instantly access a huge pool of inventory (audience); and make the deal more transparent.

DSPs play a key role in the ad exchange ecosystem. While an ad exchange is like a pipeline for the real-time stream of impressions, the DSP acts as a brain to make the whole system work properly. It connects with data management platforms (DMPs) to determine the bidding price for each impression based on user profiles and its internal algorithms.

Campaign: When did the DSP business start in China? What are the latest developments and what will the competitive landscape for the DSPs evolve into in 2013?

William:  Although there were a couple of platforms similar to DSP available in the market before 2012, we believe the true DSP businesses started in April, after Google announced its launch of DoubleClick Adx in China. Taobao launched its ad exchange platform at about the same time. These two ad exchanges are the major public marketplaces in China now. Major publishers such as Tencent, Sina, Youku and iFeng are all developing their own SSPs or private ad exchange platforms, so we¡¯ll see more audience/inventory available for RTB pretty soon.

Competition for market share is still in its early stage. We will see more DSPs emerge in the market next year. Leading agencies will try to introduce their own audience buying platforms ¡ª which may or may not work in China, depending on how they plan to work with local DSPs. Medium to smaller agencies will try to adopt local DSPs to keep themselves more competitive in the market. Many independent DSPs will focus on e-commerce clients.

Campaign: Who are the major DSP players in China? How do they position themselves in the market?

William: From what I have heard from friends at Google and Taobao, there are more than 20 DSPs available in China now. We can see two types of DSP companies in the market; one is offered from ad networks; the other is from the start-up companies. Most ad networks develop their own DSPs to take advantages of wide user coverage within their network, while new startups are trying to introduce new features quickly.

The DSPs in the first category include hdtDXP from hdtMEDIA, @iR from Yoyi and ADP from Ad-China. iPingyou and WiseMedia belong to the second category. Some DSPs focus on brand advertisers, while others focus on performance clients.

Campaign: What are the challenges for the DSP providers in China?

William: DSP is not a simple platform that can be easily developed by a small group of programmers. In order to be a powerful platform, it requires deep insights of the latest technology, greater knowledge of the ad exchange business model, as well as deep relationships with both advertisers and publishers. It is also a big challenge to the foreign DSP providers to get into the market due to the many ¡®hidden-rules¡¯, domestic technology that already works in China, and restrictions from the government.

From my point of view, three to four DSPs will dominate the market eventually. We will be able to see more clearly which DSPs will play better in the coming year.

Another challenge that DSPs in China will face is the lack of other platforms in the value chain. For example, DMPs and ad safety platforms play a critical role in the ecosystem as well.

Although there are many challenges for the ad exchange business to grow quickly, this trend is growing noticeably. I am very confident the RTB business in China will grow dramatically in 2013.