Display Ads Mechanics: How They Work

• Key Takeaways
  • Display ads are visual advertisements (images, banners, videos) shown on websites and apps.
  • They appear because advertisers pay website owners (publishers) for space.
  • The process often involves complex technology like ad networks, exchanges, and platforms that buy and sell ad space automatically in real-time.
  • Advertisers can target specific groups of people based on interests, demographics, or website content.
  • Understanding display ads mechanics helps businesses effectively use these ads to reach potential customers.

Summary

This article explains how display ads function from when a user visits a webpage to when an advertisement appears. It covers the roles of the different players involved, such as advertisers, publishers, ad networks, ad exchanges, and automated buying/selling platforms. It details the real-time process of buying and showing ads and discusses methods used to target ads to the right people. The article also touches on why businesses use display ads and some difficulties they might face, along with simple tips for making them work better. Learning about display ads mechanics provides insight into a major part of how many websites and online services are funded.

Introduction

Most people have seen display ads. They are the banners, boxes, or video advertisements that pop up on websites or within mobile apps. Unlike text-only search ads, display ads use images, animations, or video to grab attention. They are a fundamental part of the internet, helping many websites stay free for users. For businesses, display ads are a way to get their message in front of a large audience, build awareness for their products or services, and encourage people to visit their website or make a purchase. To use them effectively, it’s helpful to understand the underlying system. This article will explain display ads mechanics, breaking down the complex process into understandable parts.

What Are Display Ads?

At their core, display ads are advertisements presented in a visual format. They can take many forms, including:

• Banners: Rectangular ads often found at the top, bottom, or sides of a webpage.
• Skyscrapers: Tall, narrow ads placed along the side of content.
• Pop-ups/Pop-unders: Ads that appear in a new window, either on top of the current page (pop-up) or underneath it (pop-under). While less common now due to user annoyance, they still exist.
• Interstitials: Full-screen ads that appear before a user accesses content, like between pages on a website or levels in a mobile game.
• Rich Media Ads: Interactive ads that might include animation, video, or other elements that react to a user’s mouse movements or clicks.
• Video Ads: Advertisements that play video content, sometimes alongside or before other video content.

These ads are placed in dedicated spaces, often marked on a website layout. The website owner, known as the publisher, makes these spaces available to show ads.

The Basic Idea: A Simple Exchange

Think of a website like a physical newspaper or magazine. The newspaper company creates content (articles, stories) and sells space on its pages for advertisements. Readers see the content and the ads. The money from advertising helps the newspaper pay its writers, editors, and printers.

The idea is similar for display ads on websites. The website owner (publisher) creates content (articles, videos, tools) that attracts visitors. They sell space on their website pages to businesses (advertisers) who want to show their message to those visitors. The money from advertisers helps the publisher keep the website running, create more content, and often provide the content for free to users.

However, the online version of this exchange is much more complex and automated than the physical world. It involves many different companies and technologies working together very quickly.

The Participants in the Display Ad System

Many players are involved in getting a display ad from an advertiser’s computer screen to a user’s web browser. Understanding who does what is crucial to grasping display ads mechanics.

• Advertisers: These are the businesses or individuals who want to promote something (a product, service, idea). They create the ad (the image, video, text) and have a goal (sell more products, get more website visitors, build brand awareness). They have money to spend on advertising.
• Publishers: These are the website or app owners who have space available to show ads. They want to make money from this space while still providing good content for their visitors. They decide where on their site ads can appear.
• Ad Networks: In the early days of online advertising, ad networks were key. An ad network acts like a broker. It collects ad space from many publishers and sells it to many advertisers. This simplifies things – a small publisher doesn’t have to find individual advertisers, and a small advertiser doesn’t have to contact hundreds of websites. Ad networks bundle inventory (ad space) and audiences.
• Ad Exchanges: Ad exchanges are like stock markets for ad space. They provide a technology platform where publishers and advertisers (or companies representing them) can buy and sell ad space through automated auctions, often in real-time. They are more advanced than simple ad networks and allow for more complex transactions.
• Demand-Side Platforms (DSPs): These are technology platforms used by advertisers (or agencies working for them) to buy ad space automatically across many different websites and apps. DSPs help advertisers decide which ad space to buy, how much to pay, and which ads to show to which people, all based on the advertiser’s goals and budget. They represent the “demand” side – the buyers.
• Supply-Side Platforms (SSPs): These are technology platforms used by publishers to sell their ad space automatically to as many potential buyers as possible. SSPs help publishers manage their ad inventory, connect to multiple ad exchanges and networks, and maximize the money they make from their ad space. They represent the “supply” side – the sellers.
• Data Management Platforms (DMPs): While not directly buying or selling, DMPs play a role by collecting and organizing data about audiences. This data helps advertisers and publishers make smarter decisions about buying and selling ad space and targeting ads more effectively.

These systems work together to create a complex but highly efficient marketplace for advertising.

The Advertising Process: How an Ad Appears

The process of a display ad appearing on your screen happens incredibly fast, usually within the fraction of a second it takes a webpage to load. The most common way this happens today is through something called programmatic advertising, specifically Real-Time Bidding (RTB).

Here’s a simplified look at the steps involved in display ads mechanics using RTB:

1. User visits a webpage: Someone types a website address into their browser or clicks a link.
2. Browser asks for the webpage: The user’s web browser sends a request to the website’s server.
3. Website starts loading: The website’s server sends the webpage code back to the browser. This code includes placeholders for where ads should go.
4. Ad space becomes available: When the browser processes the page code and finds an ad placeholder, the publisher’s website (or the SSP connected to it) sends a signal. This signal says, “Hey, there’s an ad spot available on this page for this user!”
5. Information about the ad spot is sent: This signal includes details about the ad spot (size, location on the page, the website’s topic) and potentially information about the user (but usually anonymized), like their general location, browsing history from cookies, or the type of device they are using. This information is often sent to the publisher’s SSP.
6. SSP connects to the market: The SSP receives this information and sends out a bid request. It connects to various ad exchanges and potentially ad networks, essentially saying, “I have an ad spot available! Who wants to bid on it?”
7. Ad Exchange receives bids: The ad exchange receives the bid request from the SSP. It then sends this request out to many different DSPs representing various advertisers.
8. DSPs evaluate and bid: DSPs receive the bid request. Each DSP checks if the ad spot matches any of the campaigns its advertisers are running. For example, if a shoe company is using a DSP to target people interested in running shoes, the DSP will check if the user visiting the page seems to fit that profile based on the data provided. The DSP quickly decides if it wants to bid, and if so, how much the advertiser is willing to pay for that specific ad impression (one view of the ad). The DSP makes this decision based on the advertiser’s budget and how valuable showing the ad to this specific user seems to be.
9. Auction happens in real-time: The ad exchange runs an instant auction among all the DSPs that decided to bid. This auction takes only milliseconds (a tiny fraction of a second).
10. Highest bid wins: The ad spot is sold to the DSP with the highest bid.
11. Winning ad is delivered: The ad exchange tells the winning DSP it won. The winning DSP then sends the actual advertisement (the image, video file, etc.) back through the ad exchange and the SSP to the user’s browser.
12. Ad appears on the page: The user’s browser receives the ad and displays it in the designated spot on the webpage.

All of this happens automatically in the blink of an eye. By the time the webpage is fully loaded, the ad is usually already there. This complex, automated auction system is a core part of display ads mechanics today.

How Display Ads Are Targeted

Simply showing an ad to everyone who visits a website might not be the most efficient way for an advertiser to spend money. Advertisers usually want to show their ads to the people most likely to be interested in what they offer. This is where targeting comes in. Understanding targeting is important for understanding display ads mechanics.

Here are some common ways display ads are targeted:

• Contextual Targeting: Showing ads based on the content of the webpage. For example, an ad for camping gear might appear on an article about hiking trails. This is a straightforward method where the ad’s message relates directly to what the user is currently reading or viewing.
• Audience Targeting: Showing ads based on information known or inferred about the user. This can include:
  • Demographics: Age, gender, income level, education (often inferred from browsing patterns or data from other sources).
  • Interests: What the user seems interested in based on the websites they visit or the things they search for. For example, visiting many cooking websites might label a user as interested in food.
  • Behavior: Actions the user has taken, like visiting a specific product page on an advertiser’s website (retargeting) or adding items to a shopping cart but not buying them.
  • Geography: Showing ads only to users in a specific city, region, or country.
  • Device Type: Targeting users on specific devices like smartphones, tablets, or desktop computers.
• Placement Targeting: Advertisers can sometimes choose to show their ads on specific websites or apps they know their target audience visits. This is less common with programmatic buying but still possible.

Targeting relies heavily on data, often collected through cookies (small files stored in your browser) and other tracking technologies. While useful for advertisers, this data collection has also led to increased focus on user privacy and regulations like GDPR and CCPA.

Why Use Display Ads?

Businesses use display ads for several good reasons:

• Building Brand Awareness: Even if someone doesn’t click on an ad, simply seeing it can make them more familiar with a brand or product. Repeated exposure helps people remember a business.
• Reaching a Large Audience: Display ads appear on millions of websites and apps, offering the potential to reach a vast number of people who might not be actively searching for a product right now but fit the target customer profile.
• Targeting Specific Groups: Unlike traditional billboards or TV ads (which reach anyone who sees them), display ads can be highly targeted, helping advertisers show their message primarily to the people most likely to be interested. This makes advertising spend more efficient.
• Visual Communication: Display ads allow businesses to use images, videos, and interactive elements to tell their story or show their product in a more engaging way than text ads.
• Driving Website Traffic and Sales: While not always the primary goal, display ads can encourage people to click through to a website to learn more or make a purchase. Retargeting ads, in particular, are very effective at bringing back users who have previously visited a site.

Challenges with Display Ads

Despite their benefits, working with display ads isn’t always easy. Businesses face several challenges:

• Ad Blockers: Many internet users use software that prevents display ads from loading. This means some people simply won’t see the ads, reducing the potential reach.
• Viewability: An ad is considered “viewable” if at least 50% of it is on screen for at least one second (for static ads) or two seconds (for video ads). Just because an ad loads doesn’t mean a user actually saw it. Low viewability means money might be spent on ads that are never truly seen.
• Ad Fraud: This is a major problem where automated programs (bots) pretend to be real users clicking or viewing ads, costing advertisers money without reaching real people. Ad fraud can be complex to detect and prevent.
• Banner Blindness: Users often get used to seeing display ads and unconsciously ignore them, especially if they are placed in typical banner positions.
• Complexity: Understanding all the different platforms, metrics, and targeting options involved in display ads mechanics can be difficult, especially for smaller businesses.
• Privacy Concerns: As mentioned earlier, the use of user data for targeting raises privacy issues, leading to stricter rules and changes in how data can be collected and used.

Making Display Ads Work Better: Expert Advice

To get the most out of display advertising, consider these points:

• Know Your Audience: Be very clear about who you want to reach. The better you understand your target audience’s interests and behaviors, the better you can use targeting options.
• Create Compelling Ads: Don’t just put up any image. Design visually appealing ads with a clear message and a strong call to action (telling people what you want them to do, like “Shop Now” or “Learn More”). Different ad sizes are needed for different ad spots, so ensure your ads look good in all required formats.
• Target Wisely: Use the targeting options available through DSPs and ad exchanges effectively. Test different targeting methods (e.g., contextual vs. interest-based) to see what works best for your goals. Consider retargeting campaigns to reach people who have already shown interest in your business.
• Monitor and Measure Results: Don’t set up campaigns and forget about them. Regularly check performance metrics like impressions (how many times the ad was shown), clicks, click-through rate (clicks divided by impressions), conversions (desired actions like purchases or sign-ups), and cost per conversion. This data helps you see what’s working and what isn’t.
• Test and Optimize: Run A/B tests with different versions of your ads, different targeting settings, or different landing pages (the page a user arrives on after clicking the ad). Use the performance data to make changes and improve your campaigns over time.
• Focus on Viewability: Work with platforms and publishers that offer high viewability rates. An ad needs to be seen to have any impact.
• Consider Ad Fraud Prevention: Look into tools or platforms that help detect and prevent ad fraud to ensure your ad spend is reaching real people.
• Respect User Privacy: Be mindful of how you collect and use data, and stay informed about privacy regulations.

Mastering display ads mechanics involves not just understanding the technology but also applying smart strategy and continuous monitoring.

Conclusion

Understanding display ads mechanics reveals a sophisticated, fast-paced system powered by automated technology. From the initial request for a webpage to the winning ad appearing in an auction that takes milliseconds, many participants work together behind the scenes. Display ads offer businesses powerful ways to build brand recognition and reach specific audiences using visual messages. While challenges like ad blockers and viewability exist, using smart targeting, creating good ads, and carefully watching performance can help advertisers succeed in this complex but vital part of the internet economy.