Demystifying DSPs and SSPs in programmatic advertising

Programmatic advertising is filled with acronyms and technical layers that even seasoned marketers might find confusing. Two key players in this ecosystem are demand-side platforms (DSPs) and supply-side platforms (SSPs). These platforms work together to automate the buying and selling of digital ad space in real time. In this blog, we'll break down what DSPs and SSPs are, how they operate together, and where concepts like real-time bidding (RTB), ad exchanges, and data targeting (cookies or new ID solutions) fit in. By the end, you'll have a clearer picture of how a DSP connects with SSPs to make those instant ad placements possible.

What is a demand-side platform (DSP)?

A demand-side platform (DSP) is essentially software that enables an advertiser (or their agency) to buy digital advertising inventory across many websites, apps, and other media through one centralized interface. A critical feature of advertising technology is to remove the need to negotiate purchases site by site.

With a DSP, marketers can set up their campaign parameters (target audience, budget, creative assets, etc.) and let the platform automatically handle bidding for ad impressions that meet those criteria. In short, a DSP is driven by advertiser demand, it helps buyers find the right ad opportunities at the right price, across a vast range of publishers.

For example, The Trade Desk is one of the leading, independent DSPs in the industry. Using The Trade Desk, an advertiser can access ad inventory from multiple ad exchanges and publishers across the open internet.

Marketers set up campaigns on The Trade Desk, defining who they want to reach (audience targeting), how much they're willing to bid, and where/when they want their ads to appear. The platform then connects to ad exchanges and SSPs to locate matching ad impressions. A key benefit of DSPs is the ability to manage and optimize campaigns in one place. Adjusting bids, targeting, and analyzing performance across many channels (display, video, mobile, connected TV, etc.) with unified reporting.

Key features of DSPs typically include:

● Automated bidding: DSPs participate in real-time auctions for ad space on behalf of the advertiser, using algorithms to decide the optimal bid for each impression.

● Advanced targeting options: They allow fine-grained targeting by demographics, interests, behavior, location, device, and more, often by integrating with data management platforms (DMPs) or other data sources.

● Centralized campaign management: Advertisers can run multiple campaigns across numerous publishers and exchanges from a single dashboard rather than managing deals one by one.

● Reporting: DSPs provide reporting and analytics so marketers can see how their ads are performing and tweak campaigns on the fly for better results.

DSPs don't operate in a vacuum – they connect to the supply side of the ecosystem (publishers) through SSPs and ad exchanges, which we'll explain next. This simplifies the supply chain and eliminates the manual site by site deal negotiation. This means when you use a DSP, you're using a road network of publisher inventory through those SSP connections.

What is a supply-side platform (SSP)?

If a DSP is the advertiser's best friend, a supply-side platform (SSP) is the publisher’s trusty tool. An SSP is software that allows publishers that have ad space to sell (websites, app developers, etc.), to offer their ad inventory to programmatic buyers. In other words, the SSP represents the supply side of the ad equation. It's how publishers make their ad slots available to many potential buyers at once, hoping to get the best price.

An SSP connects the publisher’s available impressions to multiple ad exchanges, DSPs, and ad networks simultaneously. Instead of a publisher negotiating deals with individual advertisers, the SSP lets them aggregate demand sources. The goal for the publisher is to maximize their yield (revenue) for each impression by increasing competition among buyers. With an SSP, when an impression on the site or app is up for sale, it can solicit bids from a wide pool of advertisers in real time.

How an SSP works: When a user visits a webpage or app, the publisher's SSP receives an ad request describing the available ad slot (e.g. size, placement, user info if available, context of the page, etc.). The SSP then broadcasts this opportunity to connected marketplaces – it might send it to an ad exchange or even directly to certain DSPs. Multiple DSPs can respond with bids for the impression. The SSP will evaluate all the incoming bids and typically select the highest bid (that meets any floor price).

The winning bid means that the advertiser's ad gets to fill the slot, and the SSP helps deliver the ad creative to the publisher's site to show to the user. All of this happens almost instantaneously (within 100 millseconds).

SSPs provide publishers with controls and insights as well. Publishers can set minimum prices, block certain advertisers or ad types, and generate reporting on which advertisers are buying their inventory and for how much. In essence, the SSP is the mirror counterpart to a DSP whereby a DSP lets advertisers buy smarter, and an SSP helps publishers sell smarter.

Real-time bidding (RTB) – the instant auction

One of the key concepts enabling DSPs and SSPs to work together is real-time bidding (RTB). This is a technology protocol that conducts an automated auction for each ad impression in real time. Every time an ad slot is about to load for a user, a rapid auction takes place among advertisers who are interested in showing an ad to that specific user at that moment.

Think of RTB as a lightning-fast auction house: as a page loads, bidders (DSPs acting for advertisers) act in milliseconds to bid on the impression. If the bid wins, the ad is instantly served to the user; if not, the next highest bid might win, or the impression goes unfilled. This process repeats itself for each impression.

RTB is facilitated by the connection between DSPs, SSPs, and ad exchanges (more on exchanges next). When we say an impression is bought "programmatically via RTB," it means no human is manually approving that specific ad placement. Instead, the DSP's algorithms decided in real time that "user X on site Y is worth Z dollars” based on the targeting parameters and bid limits set by the advertiser. RTB makes advertising extremely flexible and efficient: advertisers only pay for individual impressions that meet their criteria, and publishers get to monetize impressions on the fly by selling to the highest bidder at that moment.

However, RTB doesn't mean wild, uncontrolled bidding. Advertisers set maximum bids and budget constraints in the DSP, and many use strategies (like pacing algorithms and bid adjustments) to ensure they bid intelligently rather than overspending. Publishers, on their side, can set a floor bid in their SSP so that they don't sell valuable impressions at too low of a price point. RTB is simply the mechanism that brings the two sides together for each impression in an open, competitive way.

Ad exchanges – the marketplace hub

So where do these real-time auctions happen? Enter the ad exchange. An ad exchange is essentially a digital marketplace that connects multiple DSPs with multiple SSPs, allowing them to buy and sell ad inventory in real time. You can think of the ad exchange as a stock exchange, but for ads: publishers list their available ad space (supply) and buyers (via DSPs) bid on that space.

In practice, an ad exchange is often a piece of technology (sometimes operated by a company, sometimes by an ad tech firm) that receives bid requests from SSPs and forwards them to connected DSPs. It standardizes the transaction and auction process. For example, when an SSP says, "I have impression XYZ available, who wants it?" it might relay that through an exchange. The exchange then gathers bids from various DSPs and applies the auction logic to pick a winner. The exchange ensures the process is fair and efficient. It enforces rules like auction type (e.g., first-price vs second-price auctions) and can handle thousands of bid transactions every second.

From the advertiser’s perspective (through the DSP) and the publisher’s perspective (through the SSP), the ad exchange is somewhat behind the scenes, but it's critical. It eliminates the need for one-to-one connections between every DSP and every SSP by serving as a hub. This way, a single DSP can access inventory from many publishers by being plugged into a few exchanges, and a single SSP can attract bids from many advertisers by pushing inventory into those exchanges.

It's worth noting that in some cases, the line between SSPs and ad exchanges can blur. Some SSPs operate their own exchange, and some exchanges provide tools like SSPs, but conceptually, the exchange is the marketplace where the transaction (the bidding) happens, while the SSP and DSP are the platforms where sellers and buys operate respectively

In summary, ad exchanges enable real-time bidding by creating a centralized auction house for impressions. This is how a DSP can bid on inventory coming from hundreds of different web sites and apps: it doesn't integrate individually with each publisher, but rather through exchanges and SSPs that aggregate that supply.

Data targeting: cookies and beyond

No discussion of DSPs would be complete without talking about data and targeting. One of the reasons programmatic advertising is so powerful is the ability to target specific audiences using rich data. Traditionally, this has relied on third-party cookies – small identifiers stored in a user's browser that track their visits and behaviors across different sites. DSPs leverage these identifiers to recognize users (in anonymized form) and decide whether to bid on an impression.

For example, an advertiser may want to show ads to people who previously visited their website or who have shown interest in certain products. Through a process called cookie syncing, a DSP can match a user's cookie ID with information from data management platforms or data brokers, to know if that user fits the advertiser’s target profile. If the data shows the user is, say, a car enthusiast or a recent site visitor, the DSP can bid more aggressively for that impression knowing it's more valuable to the advertiser.

Beyond cookies, DSPs also use contextual data and device identifiers. The bid request from the SSP/exchange usually includes info like the page’s context (keywords, content category) and device information (type, OS, advertising ID). This means even without a cookie, a DSP can decide to bid based on context (for example, showing a sports-related ad on a sports news article) or other signals.

However, the world of data targeting is changing. With growing privacy regulations and browsers phasing out third-party cookies, the industry is shifting toward alternative identification methods. A prime example is The Trade Desk’s Unified ID 2.0 initiative. In response to the decline of traditional cookies, The Trade Desk introduced Unified ID 2.0 as a new way to identify and target users using encrypted, hashed email addresses instead of third-party cookies.

This system allows advertisers to continue reaching specific audiences in a manner that is more considerate of privacy. Users opt in with an email (often when signing up on a website), that email is hashed (anonymized), and that identifier can be used across the advertising ecosystem to recognize the user without exposing personal information. The idea is to provide a standardized ID that improves targeting accuracy while respecting privacy and giving users more control (they can opt out if they wish).

Apart from Unified ID 2.0, there are other cookie alternatives emerging: device or app-based IDs (important in mobile apps and connected TV where cookies don’t exist), and publisher first-party data and various ID consortiums. Additionally, contextual targeting has made a comeback – focusing on the content of the page (e.g. showing travel ads on a travel article) rather than the user's past behavior. Modern DSPs are evolving to use a mix of these strategies to maintain effective targeting in a more privacy-first world.

How DSPs and SSPs work together (programmatic in action)

Need a picture here of the standard RTB process

Given all these pieces, let's walk through an illustrative example of how a DSP and SSP work together in a real scenario:

1. A user visits a website. Imagine a user opens a news-based website. The page content loads, and along with it there's an empty ad space waiting to be filled.

2. The publisher’s SSP gets an ad request. The news site (publisher) has an SSP set up to monetize its ad slots. As soon as the user navigates to the page, the site sends a request to its SSP saying, "I have a 300x250 ad slot above the fold for this user, ready to show an ad." This ad request can include some non-personal info about the context and user (e.g., context = "news/sports article", device type, and perhaps an anonymous user ID or key).

3. The SSP passes it to an ad exchange (and DSPs). The SSP now forwards this "impression opportunity" out to the marketplace. Often, it sends it to an ad exchange, which acts as the hub connecting to many DSPs. In some cases, the SSP might even ping certain DSPs directly if there are direct integrations, but generally an exchange is involved to reach a wide array of demand sources. At this moment, the ad exchange essentially shouts out to all connected DSPs, "Hey, we have a user on NewsSite.com, on a sports article, using a Chrome browser on a desktop, ad slot size 300x250 – place your bids!"

4. DSPs evaluate and bid in real time. Each DSP (like The Trade Desk, Google’s DV360, Amazon DSP, etc.) receives the bid request and instantly checks if it has any advertiser campaigns that match this impression. For instance, The Trade Desk might have advertiser A who is targeting sports enthusiasts in New York, and this user matches that profile. It also might have advertiser B who is retargeting anyone who visited their ecommerce site in the last week, and thanks to cookie/data syncing the DSP knows this user is in that retargeting pool. Each relevant campaign calculates how much that impression is worth. If it's valuable (the user fits their targeting criteria), the DSP submits a bid price (say $3.50 CPM, meaning $0.0035 for this single impression) to the exchange. And if none of the campaigns on a DSP find it relevant, that DSP might not bid at all.

5. Auction and winner selection. The ad exchange (or sometimes the SSP itself) now runs the auction among all bids received from various DSPs. Suppose The Trade Desk (on behalf of advertiser A) bid $3.50 CPM and another DSP (say Google’s) bid $2.00 CPM for that impression. The exchange would determine the highest bid – The Trade Desk wins in this case. (The final price paid might be the amount it bid or slightly above the second-highest bid, depending on first-price vs. second-price auction settings; the trend nowadays is first-price auctions for simplicity.)

6. Ad is served to the user. The SSP is informed of the winning bid and which advertiser won. The SSP then retrieves the winning ad creative (banner image, etc.) from the winning DSP/advertiser and delivers it to the user's browser. The ad loads on the page, so the user now sees advertiser A’s ad. All of this has happened in a fraction of a second without interrupting the user’s page load.

7. Reporting and data feedback. After the impression is served, the DSP and SSP log the details. The advertiser can see a report in their DSP dashboard that their ad was shown on NewsSite.com at that time, and if the user clicks the ad, that gets reported too. The publisher sees in their SSP reporting that they earned, say, $3.50 CPM for that impression, and that advertiser A (via The Trade Desk) bought it. Over time, this data helps both sides optimize – advertisers adjust their targeting/bids for better ROI, and publishers adjust floor prices or partnerships to maximize revenue.

This example illustrates how DSPs and SSPs are two halves of a whole in the programmatic advertising space. The DSP brings the advertiser’s goals and data into the equation, while the SSP brings the publisher’s inventory and rules. They meet via the ad exchange using RTB to transact in an automated, split-second auction. As one source neatly puts it: the publisher (via the SSP) wants to sell the impression at the highest price, whereas the advertiser (via the DSP) wants to buy at the lowest price, and the technology in between (exchange/RTB) finds a market-clearing price that satisfies both.

Conclusion

In the programmatic ecosystem, DSPs and SSPs work in tandem to make digital advertising more efficient and data driven. A DSP empowers marketers to reach the right audience at the right time by leveraging data and real-time bidding across a vast range of publishers. On the other hand, SSPs help publishers open their ad space to a world of demand and extract the highest value for each impression. Ad exchanges sit in the middle, serving as the marketplace that makes this scalable and executing millions of micro-auctions via RTB every day.

For experienced marketers, understanding these technical layers such as DSPs, SSPs, RTB, ad exchanges, and data targeting methods provides clarity on how your ads get delivered to the end user. It demystifies where your ad spend is going and how those audience segments you carefully built are being matched to inventory across the web. As the industry moves away from cookies and towards new identity solutions like Unified ID 2.0, the core principle remains the same: the better the demand and supply sides can talk to each other, the more relevant and efficient advertising becomes. Programmatic advertising may be complex under the hood, but at its heart it's all about connecting the right advertiser to the right publisher in real time – and DSPs and SSPs are the engines making that possible every single day.

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