These 3 Issues Will Shape the Future of Demand-Side Platforms

Consolidation, transparency and dwindling disruption

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Back in the early days of digital advertising, portals and ad networks stepped in where websites struggled. They were able to aggregate sites and audiences to achieve much more scale, leading to better forecasting, larger audiences, pricing efficiencies and bigger buys. Some websites stayed independent, but most became part of something larger.

Enter demand-side platforms (DSPs), which enable advertisers to buy, track, and serve ads from one centralized hub. The downfall of portals and ad networks came from their lack of full control and transparency. A new era of vendors, who had access to both inventory and data via open exchanges for the first-time, stole market share quickly. DSPs evolved and competed aggressively, which put pressure on rates. Ultimately, the DSPs won out.

That’s where we’ve been. But what does the future hold for the DSP market? Here’s a closer look.

Expect consolidation

Market demand for DSPs has led to consolidation within digital advertising. It has also been driven by a desire to streamline ad tech platform operations, boosting efficiency and transparency from vendors. Ultimately, there will be small companies that will innovate for individual buyers and win some share. Inevitably, however, many of these small companies will lose the ability to compete at scale and will get gobbled up.

Many vendors who fall in the middle—who are neither large nor small—will either be forced to exit the space, or will be acquired by a larger company as an attempt to bolt onto other offerings. For example, Adobe bought TubeMogul last year, while Sizmek acquired Rocket Fuel recently. No matter how you slice it, it’s clear that the market wants fewer, better options.

Demand for transparency

Anyone who pays attention to advertising trends knows that transparency is one of the industry’s hottest topics. It’s actually driving some of the DSP market’s consolidation. Now more than ever, advertisers want to know exactly how agencies and technology partners spend their dollars. A survey by the ANA found that a whopping 97 percent of advertisers want greater inventory, campaign and data transparency.

Ultimately, more transparency and accountability leads to better outcomes and ROI for advertisers. And as this demand for transparency keeps growing, the DSPs that operate in the clearest, most evident way will win the most market share. If a buyer is faced with using similar technology with comparable scale from multiple partners, they’re likely to go with the one who provides the most transparency to reduce potential risk. So as transparency demands become more stringent, DSPs who implement safeguards, provide whitelist/blacklist capabilities, activate data, know their inventory and are candid about fees, will be in the best position to benefit.

Barrier to entry is rising

Today, in the DSP market, there’s a higher barrier to entry for disruptors. Due to the high competition early on, it’s gotten harder over time to get into this space. There was a time when it was easy to start a website, and perhaps even easier to aggregate sites into an ad network. DSPs required heavier technological investment, but dozens either sprouted up, or pivoted their models to compete.

Now, you must have proprietary assets like data and inventory at scale. But even if someone has this, there remains another barrier: you need a highly skilled team and technology to manage user privacy, fairness of targeting and quality inventory. To disrupt this new era of digital media, one needs to have accrued a large, proprietary asset, and have the financial resources to safely commercialize them. That’s a tough combination to pull off.

There’s no question that big changes are on the horizon for demand-side platforms. Consolidation, transparency and a growing barrier to entry are three factors that will affect DSPs and their place in the advertising industry moving forward.