What Is an Ad Server and How Does It Work?

What is an Ad Server? Here’s what an ad server does: An ad server puts ads in front of eyeballs.

You can say it in a few simple words, but what actually goes into that simple definition is a highly complex piece of advertising technology filled with important details and plenty of nuance.

In this post, the ad tech team at Playwire lays out what ad servers are and how they work. Read on for more information, and reach out to Playwire for help maximizing advertising yield.

-- Article Continues Below --

Learn how Wrestling Headlines saw a 65% increase in revenue with Playwire.

Ad Servers: The Backbone of Online Advertising Before the internet, advertising was an endless stream of insertion orders, RFPs, meetings, invoices and dozens of other daily tasks. When online advertising took its first breaths more than 25 years ago, the frustrations and inefficiencies of this process went online.

But digital publishing made the world bigger - there were more publishers, more advertisers and more consumers to reach. The traditional advertising process wasn't prepared to handle that. Almost instantly, some future-focused advertising industry folks started building what would later become the backbone of online advertising: the ad server.

Today, ad servers handle the vast majority of advertising on the internet.

How Ad Servers Work When digital publishers create new content, that content either contains ad space or lives on a webpage that has ad space. This is a major way publishers monetize their content. But simply creating a spot for an ad does not an ad make.

Similarly, advertisers and ad agencies have ads that they need to get in front of people. And unlike buying commercial spots or billboards, efficient ad placement, in addition to a variety of other key elements such as ad format, ad tags, ad slot, etc., on the internet is not a simple act of picking a website and sending an ad to the publisher.

Ad servers bring these publishers and agencies together. They house ads and "serve" them to publishers' ad inventory slots using sophisticated decision engines and important ad targeting information.

This is done in real time as users are engaging with publishers' content. Information from an ad network about the user informs the ad that the ad server ultimately displays.

Finally, ad servers collect data on key metrics from an ad network, such as ad impressions, and report them to advertisers and publishers.

How Ad Servers Choose Which Ads to ‘Serve’ An ad server fields millions of requests at a time, so it has to be robust enough to handle that kind of volume. It also needs to be able to serve ads quickly in this fast-paced environment. But how does the server know or decide which ads to show to which people?

It uses a sophisticated decision engine. The decision the ad server has to make is about much more than the size of the ad, although this is an important consideration. It has to sift through mountains of criteria to satisfy both the advertiser and the publisher. Here are some examples:

The user's age range What kinds of websites the user is browsing The user's physical location The number of times the user has already seen the ad The number of times the ad has been shown in general or during a specified period of time Even after adjusting for tons of factors like these, the server may have dozens of ready-to-serve ads that could fit the bill. This is where the decision engine comes in. The decision engine has to engage in some sophisticated ad prioritization to decide which of the remaining ads to serve to the end user. It does this through waterfalls and unified auctions.

Waterfalls When an ad server is using a waterfall model, it is ranking certain kinds of ads as more important than others. For years, ad partners have prioritized directly sold ads over programmatic ads , and many still do. This process is meant to maximize CPMs for publishers, and ensure guaranteed campaigns use their full budget.

True Unified Auctions Another example of prioritization is a True Unified Auction, the method we use here at Playwire. This model adopts a slightly different prioritization method to maximize revenue for publishers. Under this method, every ad request — even those resulting from direct sales — gets to compete for a publisher’s ad inventory equally. And the spot goes to the highest bidder, thus maximizing yield for the publisher.

Ad Servers Have to Be Powerful With just a few lines of code, ad servers make all of these decisions in milliseconds. The end result is a seamless experience for users, maximum revenue for publishers and high CPMs for advertisers. And that's a very good thing - every wasted millisecond is a wasted chance to serve an ad and make money.

To work right, ad servers have to be powerful and smart enough to make millions of split-second decisions. But as ad tech has evolved, some other ad server features have become essential.

For example, you want your ad server to be able to handle header bidding. This method allows many different advertisers to bid on ad space on publishers' sites in real time and maximizes revenue for publishers. Keep in mind that many ad servers do not natively support header bidding - often because they want to reduce competition and sell their own open ad exchange - but many do prioritize this advanced programmatic technique.

-- Article Continues Below --

Learn how LEVVVEL doubled their ad revenue with Playwire.

Types of Ad Servers While Google Ad Manager is arguably the most dominant 3rd party ad server in the world, it represents only one of countless ad servers across the internet.

You can break ad servers down into two main categories: publisher ad servers and advertiser ad servers. And for both publisher and agency ad servers, there are a few subtypes: display ad servers, video ad servers and mobile ad servers.

Ultimately, publisher and agency ad servers connect with each other directly or through an ad tech platform via direct deals or programmatic buys to get ads in the right places.

Ad Servers for Publishers Ad servers for publishers are also called first-party servers. Here, publishers are concerned about managing their ad inventory and getting the highest ad revenue yield for it. That means they want to know how ads are performing within their content because this can inform their pricing and future yield.

First-party servers provide an ad serving platform for publishers to manage the places where they display ads, their direct campaign sales to advertisers and which kinds of ads they want to auto-serve on their sites or within their content so the ultimate result is higher ad revenue.

Ad Servers for Agencies Because agencies are third parties - between publishers and the companies that want to advertise their products or services - hosted ad servers for agencies are called third party ad servers.

Third party ad servers primarily exist to provide ad campaign data to campaign managers and their agencies - they spit out data on ad impressions, clicks, video ad completions and other key ad metrics.

However, they also allow agencies and campaign managers to manage their campaigns across a huge list of publishers. Changes to creative and copy can be made inside the hosted ad server and executed across all publishers running the ads at once.

DSPs and SSPs vs. Ad Servers In discussions of ad tech, you often hear the terms "demand-side platform" (DSP) or "supply-side platform" (SSP) used interchangeably with "ad server." But DSPs, SSPs and ad servers are not the same things.

DSPs and SSPs are often involved in the communication process between first- and third-party ad servers, though. Think of a DSP as an interface with which you can manage an ad campaign across multiple ad servers. And think of an SSP as an interface that does the same thing for publishers and their ad inventory.

The Importance of Reporting and Data with Ad Servers One of the most important functions of ad servers is the ability to spit out data about ads, ad inventory and ad performance. At the most basic level, publishers want to know how much money they are making, and agencies want to know whether their ads reached the right people the right number of times.

Ad servers tell you all of these things and more. The best ones can do it in real time, allowing both publishers and advertisers to pivot to increase their revenue and deliver on their ad campaign promises.

Data is worth its weight in gold to many agencies and publishers, and ad servers mine huge amounts of data fast . In fact, there is sometimes so much data that it can overwhelm a person or even a team trying to use it to make decisions.

This is yet another case where ad tech can step in and save the day. With innovations like artificial intelligence (AI) and machine learning, advanced ad servers can automate data-driven ad campaign and inventory decisions to increase ROI for both publishers and agencies.

Maximize Ad and Inventory Yield with Playwire The thing about ad servers is that they are pieces of technology. They evolve and change quickly. And even though they solve many problems for publishers and agencies, they also require a lot of work to manage. Efficient ad server management is key to maximizing revenue yield on ad inventory and ad campaigns.

At Playwire, managing ad servers is one piece of what we do to amplify revenue for publishers and advertisers. Instead of running your own ad ops team, choosing ad servers, managing direct deals and chasing down data for reports, you can let Playwire handle every step. Focus on what you do best while we focus on what we do best: increasing your ad revenue.

To speak with the Playwire team, contact us online or give us a call at 1-561-206-4621.

Related Articles