• Advertising

DSP vs Trading Desk: Definitions

Konstantin Mirin
19 Aug 2021
4 min
DSP vs Trading Desk: Definitions

The advancement of programmatic advertising has enabled brands to manage the media buying process independently, growing their in-house media purchase capacity. However, companies continue working with the agencies that help their clients reach target audiences launching advertising campaigns and buying ad spaces. 

Agency trading desks (ATD) are still popular among brands, especially those that don’t have in-house expertise to work directly with Demand Side Platforms (DSP). To figure out how DSPs and trading desks differ, let’s take a look at what they offer to their clients and look into their weak spots.

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    DSPs and agency trading desks represent the demand side of the advertising equation and both satisfy the need of the brands for impressions buying inventory from the publishers. This often creates confusion among advertisers.  

    A study conducted by Advertiser Perceptions showed that fewer than 25% of advertisers can accurately define DSP among other market players. 

    To avoid confusion, let’s take a look at some definitions.

    DSP is a technology platform connecting brands with Supply Side Platforms (SSPs) and ad exchanges enabling them to buy inventory programmatically. Usually this happens through real-time bidding auctions for ad space.

    There are scores of DSPs in the market: Mediasmart, Adikteev, RevX, InMobi, MediaMath, Bidease, AdColony, The Trade Desk, etc.

    Agency trading desk definition reads that it is a management platform within an agency providing services that include planning, buying, optimizing and running programmatic ad campaigns.  

    Here are some of them: Xaxis, Amnet, Digilant, VarickMedia, Accuen, Vivaki, etc.

    Service Cost

    The definitions suggest that DSPs offer a more independent approach for brands, while agency trading desks require more human resources involved in the media buying process driving the cost of their services up. 

    This is one of the key differences between the two — the cost of the service. 

    So what does a trading desk do that its services are more expensive than the ones provided by a DSP? 

    An ATD works as an intermediary between advertisers and a DSP. The latter charge its own fee to brands and an ATD adds its fees on top of the cost of a DSP.

    Some ATDs buy inventory in advance. This is when then can get it at discount and add a markup later selling it to media buyers.

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      Inventory Acquisition and Distribution Process

      While an agency trading desk is part of an agency mostly relying on human resources, DSP is technology enabling programmatic rendering of ads on specific inventory. This is what makes their processes of inventory acquisition and distribution differ.

      DSPs offer tools to manage ads of all possible formats on various platforms.

      Here is how it works:

      DSP vs Trading Desk: Definitions - photo 1

      Once a user visits a website or opens a mobile app with available inventory, the information about the user, geolocation and other targeting-useful data is sent to an ad exchange or SSP that passes it over to DSPs. After that, multiple advertisers are getting informed about an ad placement opportunity and place their bids via a DSP. As a result of a real-time auction, the advertiser who offered the highest bid wins the impression. 

      In case with an agency trading desk, an additional element is added to the chain:

      DSP vs Trading Desk: Definitions - photo 2

      Basically, this means that the agency trading desk is taking care of the process described above offering additional services at extra cost. They often include but are not limited to: planning media campaigns, providing audience analysis, detecting best ad formats for the client, launching and optimizing campaigns, offering in-depth reports with analytics on campaign performance. 

      Transparency Issue

      One of the biggest issues that calls into question the feasibility of opting for agency trading desks is transparency. 

      Over the past decade, big brands have moved to in-house media buying to cut the service costs and take control over their ad campaigns. The findings of the World Federation of Advertisers (WFA) showed that in 2017 nearly 90% of advertisers “were reviewing and resetting” their contracts with trading desks and business models to improve control and transparency. 

      Brands are concerned about the efficiency of media buying tactics used by ATDs, digital ad placement, performance metrics and so on.

      Another big issue is brand safety. In many cases, brands do not want their ads to be displayed on certain media resources that could damage their reputation. Surely, this can be discussed with ATD at the initial stage of cooperation, but a DSP offers more control over this issue allowing advertisers to choose the source of impressions directly. 

      Conclusion

      As ad-tech tools and solutions are becoming more common, agency trading desks seem to be losing ground despite their numerous advantages, including consistency of service, better targeting, better ROI and richer insights. These days brands are less willing to double pay for the service, including for marked-up media, try to avoid lack of transparency in media buying process and conflict of interest, given that agency trading desks act as both agent and vendor. 

      DSP can be a legit solution unlocking programmatic advertising potential for brands giving them access to diverse inventory and first-party data. Just keep in mind that a reliable DSP needs to have a full set of tools and features to convert inventory purchases into impressions. 

       

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