Online advertising is growing at a faster than expected rate. This year, $384.96 billion will be spent on digital ads by US marketers alone (Src). So, it’s no surprise to witness myriads of intermediaries in the space to help both the buy-side and the sell-side. However, Internet advertising started with a technology that still acts as an essential component of the supply chain – Ad Server!
In this guide, we intend to cover everything you need to know about ad servers. Let’s start with the basics.
What is an ad server?
An ad server is a piece of technology that helps publishers to create, sell, optimize, and manage ad inventories. It’s the decision layer that allows you to procure the maximum revenue while delivering the right ads to the user.
Furthermore, advertisers can use the ad servers to deliver ad creatives (requested by the publisher) and pull advanced reports for the live campaigns.
How it all started?
As we all know, the internet was booming in the 1990s. Advertisers needed a fast and effective way to reach their target audience across the globe. Traditional print and newspapers couldn’t be able to meet ROI expectations.
On the other hand, publishers with content were looking for a way to monetize. Clearly, a paywall wasn’t the right option two decades ago.
To bridge the gap, ad servers were invented. With the help of the ad server, both publishers and advertisers were able to collaborate and scale up the advertising campaigns across the globe.
What happened next?
The first banner ad served on the Internet. Source: Weizmann Institute of Science.
As you could see, not just banner ads, our technologies have also improved a lot in the last two decades. Back in 1995, all they [ad servers] can do is serve ads based on the rudimentary target metrics or context.
Contextual targeting places ads for a user based on,
– Language of the webpage,
– URL of the webpage,
– Browser type and version,
– Operating system, and
However, today, ad servers can handle more than you can probably imagine. With the advent of machine learning and algorithm developments, ad servers can schedule, sell, optimize, and measure each and every advertising campaign you see on the web.
Features of an Ad Server
An ad server can,
- Traffic ad creatives,
- Sell the ad inventories on your site (with the help of direct deals and/or ad networks),
- Optimize the campaign for higher revenue, and
- Measure and report crucial metrics including impressions, total revenue, and eCPM.
In addition, ad servers can also be used to set targeting criteria, frequency capping, and more.
Types of Ad Servers
Generally, there are two types of Ad servers.
- First-party ad server and
- Third-party ad server
First-Party Ad Servers
To put it simply, first-party ad servers are used by publishers to serve ads to the readers. They are often paired with ad networks and SSPs to increase the overall yield.
How does first-party ad server work?
- When a user visits the page, the browser will call the web server for the content.
- The server returns the content along with an ad tag.
- The ad tag will make the browser to call the ad server.
- The ad server will select a suitable campaign based on the user info (gender, hobby, age, etc).
- The line items matching the criteria are activated and allowed to compete with each other for the impressions.
- At last, the winning ad is delivered to the user.
Third-party ad servers
Third-party ad servers are used by advertisers to deliver the ad creatives and to measure the effectiveness of the campaign.
How does third-party ad serving work?
It works similar to the first-party ad servers except for the last delivering stage.
- When a user visits the page, the browser will call the webserver for the content.
- The server returns the content along with an ad tag.
- The ad tag will make the browser to call the publisher’s ad server.
- The publisher’s ad server will select a suitable campaign based on the user info.
- The line items matching the criteria gets activated and allowed to compete with each other for the impressions.
- The winning line items return the ad creative URL (pointing to the advertiser’s ad server) back to the browser.
- The browser makes the final call to the advertiser’s ad server.
- The advertiser’s ad server, also known as third-party ad server delivers the ad creative to the user.
When the ad is delivered to the user, the third-party server counts an impression. Typically, advertisers utilize a third-party ad server to track their KPIs.
Waterfall Vs Header Bidding
The ad serving technology utilizes a methodology called ‘waterfall or daisy-chaining’ to sell the remnant inventory of your site.
When the browser reaches out to your ad server to get an ad, usually, the direct-sold ads — the ones negotiated by your sales team — are served up first. Once the frequency capping has been met or the direct deals are exhausted, the ad server will try to get the ads from the connected ad networks and ad exchanges.
Of course, it’s better to have some ad networks to fill your remnant inventories. But, the problem lies in the setup.
The demand sources (ad networks and ad exchanges) are generally ranked according to factors as their buying volume, so the biggest buyer goes first, then the second-biggest and so on.
But the biggest buyers aren’t necessarily the ones that will pay the highest price for the ad impressions offered at the moment. They’re just first in line because of their historic buying volume.
The process is termed as ‘waterfall’ and is proven to be inefficient.
Today, header bidding has taken over the waterfall technique by allowing the ad inventories to compete at the same time.
The future of ad servers
Many industrialists still wonder if there’s a need for ad servers in the programmatic era. We believe ad servers will have their place at least on the sell-side.
Agreed, ad servers were originally developed to deliver ads that are directly negotiated by your sales team. Even the UI was primarily designed to help the Ad Ops team in setting direct campaigns.
But, the Ad server will be relevant because of
- Direct deals – Yes, as long as you run direct deals, ad servers will be integral.
- Features – Ad servers have features including forecasting, advanced reporting tools, and inventory management.
Leaving aside the decentralized ad server hype, we all can be certain about one thing.
Ad servers will be housing new features in the coming days. Especially, with the adtech consolidation cycle, we may see a unified platform that covers everything – from direct deals to PMPs, in the future.
Google Ad Manager:
Here’s a quick video explaining the process of ad serving.
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