If you are new to advertising on the internet and wonder how display advertising works, this blog post will tell you how! Have you ever wondered how businesses place an ad on a website you are looking at?

For this blog, I want to explain how online display advertising works. This will help empower you to understand the process and decide if you want an agency to handle it or do it on your own.

What’s Different About Online Display Advertising Anyway?

In its simplest form, online advertising relies on technology to “automate” the media buying and delivery process for better targeting and delivery. New technology and software now are able to manage campaigns in order to eliminate negotiations and manual process. Online advertising will allow you to be more precise in your ad placement.  These new tactics will foster a better user experience because website visitors will only see relevant ads, and that increases engagement and awareness.

Buying from a website publisher directly

You open up a website that you really like and you know your clients go read and consume there frequently. As a business owner reading this blog you may already be thinking…I’m going to contact the owner and advertise! Can it work? How do websites publish ads on their own?

How does it work?

Your web browser points and communicates through the owner’s website. The publisher’s (website owner) server responds back to the browser with an HTML file. This file will provide “instructions” (programming code) that define the website (font, pictures, layout, etc) and where to find additional files (pictures, ads, icons) to completely render the website.

In this file, there are additional “instructions” that point back to the publisher’s “ad server”.  The ad server responds accordingly with the ad’s file location. In this case, the file is sitting on a content delivery network (CDN).

The browser calls the CDN to request the specific file containing the advertiser created content to be loaded in the advertising space designated by the website owner/publisher.

In short, some website publishers manage their own advertising inventory and you can contact them directly to advertise for cost savings.  If they do not have an ad server they probably do not have the audience or sophistication to meet advertising needs.

Should I Contact A Website Publisher Directly? 

Rarely. It would be important to consider publishers widely vary in capability, automation, targeting options and scale. Finding a publisher who manages ad inventory on their own is rare and even more so that do it well.  Niche industries looking for deep partnerships tend to do well with successful publishers who manage their own inventory but not everyday small to medium sized businesses.  As a media buyer you need to question if the publisher’s audience is large and valuable enough for a one to one relationship.

Buying from an Ad Network

So you called the website owner and they tell you that do not handle the advertising. An “Ad Network” handles it, so set it up through them.

How does it work?

Instead of the publisher pointing toward its own ad server files, it will point to an ad network. The browser calls the ad network server, which returns the final location of the creative in its own CDN. Ad networks may be managing advertising inventory for many, many other websites. The ad network builds their own “instructions” on which sites receive advertisements based on the criteria selected by the advertiser on their platform.

Should I Buy From Ad Networks? 

It depends. Just like direct publisher inventory, ad networks can vary in scale and targeting the right audience across a variety web properties may be more challenging. As accessibility and technology evolve, more ad networks are splitting into DSPs (demand side platforms) and SSPs (supply side platforms)  that connect on an “exchange” to share unsold inventory across a variety of other exchanges, networks, and web sites with real time bidding.

So How Do Ad Exchanges Work?

Instead of the publisher server pointing toward its own CDN or an ad network, it points to a supply side platform which allow publishers to share advertising space on multiple exchanges, DSPs, and networks. This in turn allows a huge range of potential buyers to purchase ad space and for publishers to get the highest possible rates.

The demand side platform is designed for marketers to place orders for ad impressions in format, scale, and targeting from ad exchanges as cheaply and as efficiently as possible.  When an SSP generates impressions into ad exchanges, DSPs analyze and purchase them on behalf of marketers. By opening up impressions through DSPs, the target market is much larger, advertisers can scale accordingly to SSP supply. This all happens in the ad exchange with real time bidding.

How Real Time Bidding Works
Real time bidding on an Ad exchange works like an auction. Each DSP makes a bid on display impressions. The highest bidder to win, pays $0.01 more than the next highest bidder.

Here’s an example which illustrates this:
Bidder 1 $1.00
Bidder 2 $0.75
Bidder 3 (winner) $0.50

Price Paid $0.76

The actual bidding process looks like this:

1. The SSP provides an inventory to the exchange
2. The Exchange makes a call to the DSP with an available impression.
3. DSP checks to see if they want this impression
4. DSP makes a bid for it based on how much they think its worth or can afford to pay
5. Exchange sells the impression to the highest bidder.
6. Ad is delivered by the winning bidder.

Should I buy through ad exchange networks?

Yes!  DSPs will look for the best price and exchanges will provide a large variety of inventory to test. If you buy through an ad exchange make sure you have a reliable dashboard and proper tagging to achieve a clear view on the best performing web inventory available to make changes on bidding and placement.

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