Because DSPs manage programmatic ad spend, they can be seen as gatekeepers wielding influence over industry standards.
DSPs select inventory to bid on, interpret SSP signals and prioritize bids based on historical performance and preferences.
However, advertisers, agencies, media owners and technology providers also influence the rapidly evolving programmatic ecosystem. Advertisers and agencies set budgets, KPIs and targeting and brand-safety parameters. Publishers influence SSP behavior and, therefore, DSP behavior through inventory packaging and pricing.
Nevertheless, DSPs influence the entire system. But with power also comes responsibility.
Take, for example, how slow DSP adoption is undermining the transition to the IAB Tech Lab’s new standard for instream video ad inventory, forcing SSPs to support both old and new standards. Or consider how high-quality news media traffic goes unmonetized because of legacy keyword blocking features left to fossilize in agencies’ DSP accounts.
But DSP influence may be most apparent in our industry’s ongoing reliance on third-party audience signals. If we’re to truly leave behind the third-party cookie era, the rest of the ecosystem must reassert the role it plays in setting the agenda.
The quest for identity
DSPs face a learning curve in how they treat audience signals that do not include “traditional” identifiers like cookies.
Some critics speculate that DSPs are intentionally deprioritizing ID-less inventory to spur adoption of their chosen third-party IDs. But the reality is more nuanced. Performance algorithms, shaped by historical data, often allocate budgets to inventory that has proven effective – typically ID-based – until new solutions demonstrate equal or better ROI.
Without ways to analyze how ID-less impressions perform over time, DSPs struggle to optimize bidding strategies effectively. This creates a cycle where limited historical data leads to conservative spending on ID-less inventory, which restricts opportunities to generate the data needed for optimization.
In addition, QPS (queries per second) limits imposed by DSPs push SSPs toward only sending bid requests where an ID is present.
A tricky situation
The challenges of transitioning to ID-less solutions are multifaceted and deeply interconnected. Technical debt and legacy infrastructure loom large across the ecosystem. All players are grappling with the cost and complexity of updating their systems and strategies.
There’s understandable hesitation to overhaul profitable processes overnight, even when the long-term trends are clear. As such, this transformation will take time.
In a recent conversation, IAB Tech Lab CEO Tony Katsur predicted that “over the next five to seven years, we’ll see the industry shift […] towards a large cohort or lookalike model approach.” He added, “In this model, a cohort might have a single identifier applied to the entire group, which could consist of thousands of consumers.”
The lack of robust standardization and measurement practices for ID-less solutions further complicates the landscape. Performance concerns and risk aversion are also significant hurdles.
Advertisers and agencies naturally gravitate toward proven ID-based targeting methods, while ID-less strategies – whether contextual or first-party data-driven – still require consistent testing and clear performance metrics.
This uncertainty is compounded by knowledge gaps within marketing and advertising teams. Until ID-less success stories and best practices become more widely known, demand for these solutions may continue to stagnate.
There are also knowledge gaps among publishers – while larger media companies possess the resources to implement sophisticated first-party data strategies, smaller ones often struggle to adapt. These smaller publishers get stuck in a perpetual cycle of emergency, where short-term fixes lead to vulnerabilities, making the next emergency more likely.
If ID-less solutions fail to mature rapidly enough, we risk reinforcing the market power of established platforms and resource-rich players. This could create a self-perpetuating cycle where smaller participants, lacking the means to adapt, find themselves increasingly marginalized.
The regulatory landscape adds another layer of complexity, as companies must navigate evolving privacy requirements while developing new solutions.
A path forward
Progress demands collaborative action. DSPs must accelerate their support for ID-less approaches. But this acceleration needs to happen in concert with advertiser demand, the proliferation of appropriate seller signals and updated standards throughout the supply chain.
Industry bodies and working groups have a crucial role to play in developing transparent, consistent measurement frameworks that give buyers confidence in evaluating ID-less performance. Education and knowledge-sharing are also paramount.
Perhaps most critically, the ongoing development of identity solutions must balance commercial realities with the vision of a more open ecosystem. Whether through pure utility models or highly interoperable systems, these solutions must remain accessible enough to prevent the exclusion of smaller players.
An ecosystem reimagined
Undoubtedly, DSPs drive standards and practices. Their impact on innovation is often a game changer.
When it comes to adoption of ID-less solutions, though, a single party doesn’t control the outcomes. Multiple stakeholders share responsibility for shaping an equitable, privacy-conscious and performance-driven future.
DSPs need to provide real value to the advertiser. But, paradoxically, while the sell side may be able to prove the value of its audience, it may not always be able to disclose that value in order to preserve privacy.
A solution might be to rebuild buyer trust at the source. In my two-tiered vision for the future of digital advertising, a direct relationship between buyers and top-tier sellers might make strict DSP media requirements irrelevant. Buyers would be more willing to trust the signals coming from media owners and SSPs that have earned their trust.
Any discussion of audience signals boils down to the lack of trust between the buy and the sell side and whether that mistrust is justified.
But the future of digital advertising isn’t about patching old cracks; it’s about laying new foundations.
“Data-Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.
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