Why Third-Party Ad Servers Are Necessary In The Emerging DSP Market

Data-Driven ThinkingGeorge Allen is Senior Product Manager, Mediaplex, an advertising technology solutions company, and a division of ValueClick.

The arrival of Demand Side Platforms (DSPs) may very well signal a better way to access exchange media inventory, but if you are thinking that means doing away with your third party ad server, keep reading.

DSPs have arrived in a big way, and a lot has been written lately about how they will help influence the future of online advertising. After all, DSPs are all about delivering on the promise of how to most effectively and efficiently utilize data, eliminating wasted time and resources to generate better results for your online marketing programs. While the future for DSPs looks promising, it’s important to not lose sight of a fundamental backbone technology piece that will continue to play a critical part in the advancement of DSPs: the third-party ad server.

Third-party ad servers provide the fundamental tools for managing, tracking and reporting on display advertising campaigns. Marketers must be able to monitor all types of campaigns and report on creative and targeting performance in order to fully leverage the demand side technology. Having an additional tool to acquire media and leverage data is great, but that is only part of the solution.  A truly viable solution requires a complete display management system.

Here are just a few reasons why third-party ad servers are necessary in the emerging DSP market:

  1. Ad servers provide comprehensive tracking, retargeting, optimization and reporting of all media buy types. Whether it’s a CPA affiliate campaign, a CPM buy from a niche site, or a CPC deal with a direct site, ad servers are designed to track and report on all activity across channels. In addition, some ad servers even incorporate tracking of natural search, paid search and email. The vast majority of Demand Side Platforms are specifically designed to mainly track and manage Exchange buys.
  2. Ad servers de-duplicate conversions across media buys by attributing a conversion event to only one media vendor. Without this type of de-duplication, advertisers end up misinterpreting which suppliers are really driving conversions and, in the case of CPA buys, advertisers can end up paying rev-share fees multiple times for a single conversion.
  3. Industry consolidation and competition has weeded out all but the most reliable and effective ad servers. You’ll also find that these ad servers can be counted on for 99% up-time, reliability, and IAB and NAI compliance – to name a few. The DSP life cycle, on the other hand, has just started. One can expect a lot of hope, hype and future promise among DSP vendors, but not necessarily proven track records.
  4. Ad servers have expertise and highly developed tools for creative rendering and tracking. It will be a long time before DSPs can provide things like auto-optimized dynamic messaging, where the best performing combination or iteration of creative variables are systematically determined. Support for Rich Media formats, such as floating, expandable or tandem, are another area where current DSPs are lacking – not to mention Rich Media reporting and publisher acceptance.
  5. Marketers buying exchange and network inventory don’t always have control over where their ads are displayed. Typically, they have transparency after the fact. Marketers will continue to buy inventory directly from specific sites to ensure targeted reach and appropriate brand exposure. Although DSPs in some cases have partnered with brand safety companies, they are not designed to buy inventory directly from specific sites.
  6. Third-party ad servers have highly-evolved reports, such as Path to Conversion, Site Overlap and Reach and Frequency reports that allow marketers to fully understand how and when users are interacting with the media. DSPs have barely scratched the surface in terms of their reporting capabilities.

Ad servers have been effectively managing the demand side of display for more than a decade and will continue to be a critical tool in managing display campaigns. It makes sense to assume that the lines between DSPs and third-party ad servers will cross and eventually achieve total integration in the years to come. However, in order to effectively manage the demand side, DSPs will need to build out the functionality which today is only available with a third-party ad server. As the exchange market grows, these ad servers will most likely integrate with exchanges directly or partner with a DSP that does. Until that time, third-party ad servers will continue to fill a critical role in the management of display advertising.

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  1. Relevance Police

    Well articulated benefits of 3rd party ad servers. Without TPAS, there can be no display campaigns that can be executed at all.

    Let’s consider what a next generation demand side ad server ought to be doing in this dynamic marketing ecosystem:

    1) Ability to construct creatives on the fly from offer feeds, media message feeds and complex business rules that cover audience, context, media placement data and offline performance data.

    2) The ad server must be able to accept data coming in at ad serving time from any source: publisher, network, exchange, 3rd party data append et al. and normalize it in a manner that can make personalization work at scale. The ability to log and report external data alone is huge.

    3) This ad server must have a performance latency of less than 10ms to execute on creative and media decisions and return dynamic data to be presented for 1 to 1 marketing at scale

    4) Ability to rigorously explore versus exploit according to control versus non-control user buckets and expose them to several different algorithms is a requirement

    5) Ability to auto-optimize the creative based on high dimensionality in the incoming ad serving context

    6) Analytical scale is a mandate from these servers.

    7) Ability to deal with ad delivery into any channel – mobile, social media, video and e-mail and understand user engagements that spring from there is a requirement.

    Now, the DSPs don’t do anything even remotely comparable to the level of sophistication required of an ad server either in terms of system scale or enabling relevance. There are some simple tactics that are being applied by the DSPs to affect a form of media selection and pricing based on data. These companies do not have the DNA of machine learning, data mining or massive search engine like content awareness.

    The few that do have some very strong technology DNA are all to be found in Silicon Valley, not in New York or Boston. They are Turn, RocketFuel, Tumri, Aggregate Knowledge and to a small extent Teracent. Invite Media is a UI app with API connectivity to RTB sources and a simple bid manager. Google’s due diligence on Invite is at best inadequate. Of these, Tumri seems to be the only one to have done the hard work to come up with the next generation ad serving platform that actually personalizes and optimizes either in display or in other channels.

    That’s what is really needed. When is it time to eliminate DFA and Atlas for their lack of innovation in addition to enabling the entire ecosystem to degenerate into a mediocre one to be supported by armies of “traffickers” at agencies.

    • These are good points that would be even more compelling if you weren’t anonymous (implication being that you’re talking your book).

      I think, though, that your comments about Invite are missing the point. This wasn’t a lack of due diligence by Google. It was a reflection of current agency sentiment. By shifting dollars to invite, agencies have clearly stated that they want 1) simple ways to buy audience, 2) total transparency, and 3) low margins. They want their hands on the reins to start “optimizing” themselves. Some will be wildly successful – others will be great prospects for the companies you reference in 12 months.

  2. Relevance Police

    Well, your implication would sound reasonable but the truth is something else. I don’t have a book that I am talking to. I can only say that I am not affiliated with any of the companies that are referred to here. I am more closely aligned with a digital agency.

    You may be right that I am underestimating what Invite has done.

    Invite as a media buying and UI extension to DFA is definitely a good thing. But I have not seen any evidence of them being able to support the main DSP use case of: leverage economies of scale that exist within agencies with their media buying power to gather great returns for a “group of advertisers” and making runtime decisions about pricing and fitness of an impression for an advertiser, campaign, creative and messaging.

    Are you suggesting that they are the only “DSP” out there with a platform model that enables transparency?