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I always love the opportunity to get a greater understanding of the work within my occupation. As much as I enjoy the many points of view on digital advertising, I’ve found knowing the foundational elements central to the (ad) food chain has helped me have smarter conversations.

This article is inspired from a friend and former co-worker of mine, Josh Hill, who helped me gain a better understanding of how buying online advertising works — and what we should do to get the most from it.

Understanding the Ad Buying Marketplace
This begins with an awareness of the different platform entities you can leverage to buy and sell online advertising, often in a real-time bidding (RTB) scenario. Note: “the ad buying marketplace” is made of multiple ad platforms, with the largest ones either owned or backed by Microsoft, Yahoo! and Google (no surprises there, right?).

Before we get into the insights, the following is helpful to understand with respect to the ad food chain and its associated data partners. Note: The picture further down should help you to tie it all together:

Direct Buy (Top of Chain): refers to purchasing specific ad placements directly from the source (owner of a specific website, for example). If you buy top-of-the-chain ad inventory, you can expect the CPM (cost per thousand impressions) to be more expensive because you are essentially buying advertising before it goes up for bid online via an ad platform.

The advantage is you get first dibs on the specific placements you want – but the side effect to this specificity accompanies a minimal level of overall impressions.

SSP (Supply Side Platform), also known as a Sell Side Platform — this is technology that enables web owners/publishers to sell and manage ad inventory (space) they have for those who wish to place ads on a wide range of web properties. Supply side platforms are helpful to you as the ad buyer because they provide info on where advertisements can be placed based on targeting specific types of websites, verticals and demographics.

The SSP can be considered the next level down the chain, with an expected cost for impressions less than a direct buy — but with a greater volume of impressions overall based on diversity among audiences who are targeted by sites they visit, industry or interest specific verticals and demographics.

DSP (Demand Side Platform): Opposite to the publisher (SSP) side that enables the selling of advertising, is the advertiser/buying side which can leverage a demand side platform (DSP) as a means of bidding on ad placements and tracking effectiveness across multiple exchanges/platforms/channels.

The main advantage of working with demand side platforms is in the partnerships they’ve formed with supply side platforms. DSP’s partner with as many SSP’s as possible to take their inventory as it becomes available. You can get a better understanding of this by looking at a company like Choozle, which is an example of an emerging DSP that has big SSP partners like DoubleClick and OpenX.

The by-product of those SSP partners includes extra layers of data related to interests and behaviors of target audiences (which we advertisers love). The overall (bottom-of-chain) benefit can be an even lower CPM (costs) for a more targeted yet relatively high-volume viewer base.

Note: DSP’s can also be very exchange and feature-specific (Google Adwords, for example).

Buying in Action
Through a hierarchy of various demand channels with higher CPMs at the top, and lower CPMs at the bottom, ad inventories are queried (in food chain order) until some advertiser figuratively raises their hand and says, “I’ll pay for that individual placement.”

The cost is related to specificity of placement. Ironically, you can target individual users in more detail further down the chain — but the risk is the inventory could be taken before you can buy it. That’s where priority comes in below.

Ad Buying Food Chain
The graphic above is a (highly) simplified version of the ad buying food chain. As we go down the food chain, the fish (ad) becomes more affordable, and potentially available to a wider audience.

Why Do We Care?
An important insight related to this is that a variety of partners in the middle of the chain is most advantageous for agencies and their clients. For example, partnering with a SSP like SpotXchange (a company focused on video ads) may generate the greatest opportunity to get inventory before it goes (further out) to exchange.

Other kinds of vertical-based targeting on independent but high-quality content (again) before it goes to exchange justifies why an agency might partner with several SSP’s, but maybe only 1-2 DSP’s.

As a final nod to Josh — his expressed point of view, actively argued within the agency, is that top of chain buys are “for people who can’t explain how advertising works.”

Jason Cormier

Jason Cormier

As co-founding Partner of Room 214, Jason is dedicated to helping people and companies grow and innovate. He is a best-selling author of Transformative Digital Marketing, is on HubSpot's Global Partner Advisory Council and serves as a mentor for social entrepreneurs at Watson University. He believes in acting out of love instead of fear, connected leadership and open book management.