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Disclaimer: I have a bit of a horse in this race because I lead buy side product for AppNexus and one of our products, Console, can be used as a DSP. That being said, I’ve been studying this space for a long time and I’ll try to be as objective as possible.
Before you get started with your DSP evaluation, there are two very important things you need to know about the DSP space.
One: Media vs. Technology.
Inside the DSP category there is a hidden dichotomy between two distinct offerings (two distinct industries, really): media and technology. When evaluating DSPs the first thing you need to think about is whether you’re really looking for more of a media-first solution or more of a tech-first solution.
The choice is not as straightforward as you might think.
Are you an agency who is looking for a new vendor to put on your media plan and see how the performance compares to other DSPs, Networks and Publishers? Are you a marketer who really wants a full service solution and easy results? Are you a trade desk who wants to tap into the efficiency of programmatic buying but doesn’t have a team of traders? If any of these questions resonate, you’re probably looking for more of a media-first solution.
Are you a marketer with a data science team that you want to leverage to optimize your paid media? Are you a marketer who is looking to build a differentiated in-house media buying capability? Are you an agency or ATD with a built out trading team? Are you an ad tech provider looking to build on top of a commodity ad tech platform to accelerate your time to market and allow you to focus your development effort only on differentiated features? If any of these questions resonate, you’re probably looking for more of a technology-first solution.
Knowing up front whether you’re looking for media-first or technology-first will help guide how you evaluate solutions.
Two: How to tell if you’re talking to someone who will provide “media” vs. “technology”.
This one will be very confusing for industry outsiders. Every company in the DSP space (no matter if they’re really providing media or tech) will say that they are a technology company. The reason for this is rooted in the funding/capitalization side of the business. Ad tech is very over-invested and every company in the space is looking for an “exit” – either an acquisition or a public offering – to provide liquidity for investors (often venture capitalists). Historically speaking, at time of exit, “media” companies earn a valuation that is between 0.5x and 1.5x their annual revenue. So – for instance, if a media company is making $100M in revenue, that company could be valued between $50M and $150M. Not bad, right?
Well – on the other side of the aisle, “technology” companies earn a valuation that is between 6x and 10x their annual revenue. So that same company with $100M in revenue, if it were a “technology” company, would be worth $600M – $1B.
This is why every company in the space, regardless of whether or not they provide media or technology, will aggressively assert that they are a technology company.
If you have trouble telling the difference in the market, you are not alone, but this is something you’re going to have to look past in order to find the solution that will work best for you. Just remember this one straightforward rule of thumb: technology empowers you to do things, while media is something that someone else delivers for you. (more…)