What is an Ad Network and How Does it Work?

During the initial shift from print to digital advertising, publishers adopted print media practices to monetize their ad space. While it did facilitate a decent start by letting them sell some of their advertising space via direct sales, with time they realized that the existing model would not be able to give long-term results.

Digital advertising was a radically new landscape at that time with constant advancements in data collection and management. Hence, old techniques were not a good fit and the publishers were looking for innovative solutions that would optimize media buying and make it truly data-driven. That is when ad networks came into the picture. 

What is an Ad Network?

An ad network or advertising network acts as a single point of access for both publishers and advertisers. Its key function is the aggregation of ad supply available with the publishers and matching it with the requirements of the advertisers. Most of them also provide reporting and tracking support.

The first ad network emerged in the mid-’90s when online advertising was in its initial stages. It helped the publishers iron out the inefficiencies of the market to be able to effectively sell the ad space and meet the advertisers’ demand. Traditionally, its work was to collect unsold ad inventory and offer this pool of impressions to the demand side at a much lower price than the publishers’ direct sales. This kind of inventory sales is often referred to as remnant or non-premium. 

However, modern advertising networks have evolved to take a more strategic approach towards offering advertisers the best deals on the premium placement of their ads that have the potential to achieve the highest conversion rates.

How Does an Ad Network Work? 

• An ad network aggregates publishers to meet the advertisers’ demand for ad space on an auction basis
• The publisher installs the ad network ad tags on their site by inserting them directly into the page or through a first-party ad server.
• The advertiser can set up the campaigns directly through an ad network’s campaign management panel, including parameters such as targeting, budget, frequency caps, etc.
• Once the ad is published, the advertiser can rotate multiple banners on the website with the help of the ad network campaign management panel.

The Different Types of Ad Networks

Advertising networks can be divided into three categories based on their service for advertisers and publishers.

1. Based on business strategy

• Vertical networks: Have a large inventory from several sites across different verticals with advanced targeting capabilities. It provides full transparency for the advertiser about where their ads will run.
• Horizontal networks: Offer good pricing to direct marketers but do not tell them where their ad is going to be placed, hence the name ‘Blind Network’. Publishers are provided with certain tools to accept, block and optimize campaigns.
• Targeted networks: Also called "next generation" or "2.0" ad networks, they make use of specific targeting technologies such as behavioural or contextual, to get the desired results.

2. Based on the number of clients and traffic quality

• First-tier advertising networks: They have a large number of advertisers and publishers backed by high-quality traffic. Additionally, they serve ads and traffic to second-tier networks.
• Second-tier advertising networks: They have a smaller number of advertisers and publishers and partner with first-tier networks to extend their reach.

3. Based on different formats

Ad networks often support a wide spectrum of ad formats like banners, native, display, mobile, video, etc.

• Mobile ad networks: As the name suggests, such networks focus on traffic and leads via mobile apps, and work with the corresponding ad formats
• Video ad networks: They serve ads via inventory, associated with online video content

Pros of Ad Networks

Understanding what is an ad network and how it works is incomplete without knowing its benefits for publishers and advertisers. 

1. Reach and scalability: Ad networks allow advertisers to reach a wider audience and publishers to connect with a larger pool of buyers.

2. Targeting and reporting: Advertisers can serve their ads alongside the specific type of content or target them based on the user’s device, location, time, etc. Further, they can leverage the analytics data to better understand their campaigns.

3. Flexibility: Ad networks vary in the degree of flexibility and control they offer, however, most of them allow publishers to block particular advertisers to be able to preserve the user experience. Flexibility for advertisers pertains to the type of audience they can reach or the type of ads they can serve.

4. Convenience: Especially for small publishers, an ad network is the best to supplement for their ad sales team. It allows them to reach a larger group of advertisers and also handle the administrative components of the ad sales process. This helps them save a lot of time and money.

Key Takeaways

Ad networks play a crucial role in the buying and selling of advertising space. Further, the rising competition and advancement in advertising technologies continue to drive enhancements in its capabilities. This, in turn, makes it important for advertisers and publishers to understand the importance of ad networks and learn their effective implementation in their ad operations, leading to better campaign performance.