How do Display Ads Work: For Your Ultimate Clarity

As we browse the internet, we come across various types of online advertising. One of the most common types of advertising is display ads. But, have you ever wondered how display ads work? how does this complex ad targeting helps improve millions of businesses on the internet?

As a content creator and someone who is quite curious about this topic, I decided to do some research and found out as much as I can, about Display Ads.

Display ads work by appearing on websites or apps in the form of texts, images, or videos to attract the attention of users. Ad networks, which are the distributors of ads to these websites and apps, use various targeting options, such as demographics, interests, and behavior, to show these ads to the right audience. The more relevant and engaging the ad, the higher the chance of the user clicking on it, which can lead to a visit to the advertiser’s website or even a conversion.

Let’s deep dive into what these words exactly mean and how it works on the core level…

What Are Display Ads? And How Do Display Ads Work?

Display ads are visual/graphical advertisements that appear on websites, social media platforms, and search engines. They typically consist of images, text, and/or video and are designed to catch the attention of potential customers.

You need to understand, that these can be static or dynamic, meaning they can include animations, interactive elements, or personalized content.

Ads are essential for businesses to market their brand or product and create awareness on the internet. And after all, this is the key contributor to the economies of many countries including the USA at the highest.

Advertising expenditures generated $5.8 trillion in overall consumer sales including direct, indirect and induced expenditures, in USA.

Acc. to Driving Growth

By understanding how display ads work, businesses can use them to increase their online visibility and drive traffic and conversions to their websites.

Allow me to drive you through the three-step process of Display ads Creation to Delivery so that you can have a clear understanding of how display ads work exactly!!!

Ad Creation: The Demand of Advertisers

Advertisers – The sole reason for which the ads industry is a driving factor in the global economy, with ad spending in the Banner Advertising segment projected to reach US$161.80bn this year (2023).

It’s their demands that have led to the creation of such a vast industry online, which you can see almost on every webpage you visit nowadays, with an Ad trying to convert you to a different web page.

So, when an Advertiser wants to run a display ad campaign, they typically work with an ad network (like Google ads, Ezoic, Mediavine, etc.) or advertising platform (websites or apps) to reach their desired audience. And these ad networks serve the ads to users who fit the targeting criteria set by the advertiser.

You can also choose to directly contact the owner of a website if you wanna specifically run display ads on one or more.

Display ads work on a kind of bidding system, where advertisers bid to have their ads displayed on websites or apps. Advertisers bid on the keywords on the basis of cost per impression (CPM), cost per click (CPC), or cost per acquisition (CPA).

The ad network charges the advertiser based on the number of impressions (views) or clicks the ad receives.

With CPC, advertisers are charged each time a user clicks on their ad, while with CPM, advertisers are charged for every thousand times their ad is displayed to a user.

Advertisers can set a maximum bid for each click or impression they receive, and the ad network will try to show their ads as often as possible within that budget. The actual cost per click or impression will depend on factors such as the competitiveness of the targeted audience and the quality of the ad itself.

Ad Interpretation and Sorting: The Region of Ad Networks and Platforms

Now, the beautiful part about display advertising is that it offers all businesses or individuals the ability to reach relevant audiences all over the internet.

This means it’s so much more flexible than any other time in history to specifically target your keywords, target audience, webpages, apps, etc., where you want to deliver your ads on the internet.

Isn’t that amazing?

You must be wondering, that how it’s so flexible and what are the options given to advertisers to generally choose from.

Hmm… So let’s dive into that!

Once an advertiser creates an ad and submits it to an ad network or platform, the network takes over the responsibility of ensuring that the ad is displayed to the right audience. Ad networks typically use a variety of algorithms and data analytics tools to identify the target audience for each ad and place it in the most effective location on a publisher’s website or app.

The ad network tracks the performance of each ad and continually optimizes it for better results.

Ad networks use data analytics to monitor user behavior and adjust ad placements and targeting accordingly. This helps to ensure that the ad reaches the right audience and generates the best possible results for the advertiser and the publisher.

That’s how Ad networks play a crucial role in this display advertising ecosystem, acting as intermediaries between advertisers and publishers.

By leveraging their expertise in targeting and optimization, ad networks help advertisers to reach their target audience and maximize the performance of their campaigns, while also helping publishers to monetize their content and earn revenue.

(Keep reading to learn more about targeting and optimization of ads later in this article)

Now let me drive you to the third or the last step, and show you how all these ads are displayed by websites or apps owners, known as Publishers, after you (the advertiser) give your ad campaign details to the ad networks or platforms, and after they have processed the Interpretation and Sorting process.

Ad Delivery: The Role of Publishers

Display ads can be the key to the success or failure of your business. But have you ever wondered who’s responsible for displaying them?

So keep your eyeballs moving line-by-line downwards…

After the advertiser has created an ad campaign, which includes selecting the target audience, ad creative, and budget, the ad network or exchange then uses this information to find available ad space that matches the advertiser’s targeting criteria, as we discussed above.

Now, that’s where the Publisher (websites or app owners) role kicks in…

When a user visits a website or app that has available ad space, the ad network or exchange uses real-time bidding (RTB) to determine which ad to display. Ad networks also use algorithms and machine learning to analyze user behavior and interests to serve more relevant and engaging ads

RTB is an auction-based system where advertisers bid on available ad space in real-time.

The highest bidder wins the auction and their ad is displayed to the user.

After which, when a user clicks on a display ad, they are taken to the advertiser’s landing page, which could be a product page, lead generation form, or any other type of desired action.

The advertiser then pays the ad network or exchange for each click or impression, depending on the type of pricing model they have chosen.

Now you must be wondering, what about the earnings that you’ve heard about?

Let’s learn that too…

Publishers, or website and app owners, also earn revenue from displaying display ads on their properties.

I mean why would they display ads and cover their web pages without any profit???

They receive a portion of the revenue earned by the ad network or exchange for each click or impression. The amount earned by the publisher varies depending on the pricing model and the demand for ad space and also which ad network they are a part of, which we will discuss later in the article.

In addition, some publishers also use programmatic advertising to display ads on their properties. This involves using automated software to sell ad space, instead of working with an ad network or exchange.

Programmatic advertising can offer greater control and flexibility for publishers but also requires more technical expertise.

Overall, the delivery of display ads involves a complex process of matching advertisers with available ad space, using real-time bidding to determine which ad to display, and tracking user interactions to determine the effectiveness of the campaign.

Hope you got to understand the process, as I tried to simplify it in the easiest way possible for you.

The model which keeps this industry growing is, both advertisers and publishers can earn revenue from display advertising, making it an important part of the online advertising ecosystem.

Now let me tell you more about the different types of display ads available, how to choose the right format for your goals, and how it is important to consider for both advertisers and publishers.

Different Types of Display Ads: Choosing the Right Format for Your Goals

Let me share with you some of the common types of Display Ads available to choose from. Here it is:

1. Banner ads: These are the most common type of display ads that appear at the top or bottom of a website. They are rectangular ads that appear at the top, bottom, or sides of a webpage and can be static images or animated GIFs.
2. Native ads: These ads are designed to look like they are part of the website’s content and blend in with the surrounding content. They are effective because they blend in with the surrounding content and don’t disrupt the user experience. They can be used to promote a product or service without appearing like an advertisement.
3. Interstitial ads: These ads appear in between website content or before/after a user has interacted with the content. They are effective at capturing users’ attention because they appear between website content. They can be used to promote a new product or service or to collect user information.
4. Pop-up ads: These ads appear in a new window that pops up over the website content. These are ads that appear in a separate window or tab when a user clicks on a link or visits a website. They can be very effective, but can also be seen as annoying by some users.
5. Video ads: These are ads that appear before, during, or after a video. Highly engaging, and can be used to tell a brand’s story or showcase a product. They are great for building brand awareness and driving website traffic.
6. Rich media ads: These ads include advanced features like interactive elements, animation, and video. These ads are highly engaging and can be used to create interactive experiences that encourage users to interact with the brand. They can be used to promote a new product or service or to drive website traffic.
7. Social media ads: As you can see from the name, these ads appear on social media platforms like Facebook, Instagram, Twitter, and LinkedIn. They are highly targeted and can be used to reach specific audiences on different platforms. They can be used to promote a product or service, build brand awareness, or drive website traffic.
8. Programmatic ads: These ads are bought and sold through automated bidding systems that match advertisers with publishers. A little complex but highly efficient and cost-effective, because they are bought and sold through automated bidding systems. They can be used to reach specific audiences on a variety of websites and apps.

Now, you must be thinking, why do I need to get aware of these ads?

Well, you can see that in each specific USE of the ads I have listed along with the definition of each one of them above.

Learning about the different types of display ads is essential for both advertisers and publishers because it helps them understand which ad formats work best for their goals and target audience.

By knowing the strengths and weaknesses of each type of display ad, advertisers can create more effective campaigns that resonate with their audience, leading to higher engagement and conversions.

Similarly, publishers can optimize their websites for specific ad formats that are more likely to attract high-quality advertisers and generate more revenue.

Now allow me to explain to you two important topics in Display Ads creation and management, that I promised above. Starting with…

Display Ads Targeting Options: Reaching the Right Audience

Whenever you’re working on an ad campaign, the most important thing to consider after the ad creation is whom to send these ads? Who are the ones that are gonna convert to these ads?

And that’s where Targeting enters…

Targeting your ads ensures that they are shown to the right audience and increase the chances of conversions.

Display ads can be targeted to specific audiences based on various options, including demographics, interests, location, device type, etc. This targeting helps ensure that the ad is displayed to the right audience, increasing the chances of a successful campaign.

1. Demographic targeting includes options such as age, gender, education level, income, and more.
2. Interest targeting includes options such as hobbies, interests, and behaviors.
3. Location targeting includes options such as country, state, city, and even zip code.
4. Device targeting includes options such as desktop, mobile, or tablet.
5. Advertisers can also target users based on their device’s operating system, such as Android or iOS.

As you can understand from the targeting strategy, it’s for the Advertisers, who create ads and pays to display them to ad networks or directly to publishers.

It allows advertisers to reach their desired audience with greater accuracy and relevance.

This results in higher engagement rates, click-through rates, and ultimately, conversions. Advertisers can also save money by not wasting their ad budget on showing their ads to people who are not likely to be interested.

These targeting options also allow advertisers to test and optimize their campaigns by analyzing the performance of different targeting options and making adjustments accordingly, leading to even more effective campaigns and a higher return on investment.

Display Ads Optimization Strategies: Getting the Most out of Display Ads

Optimizing the performance of display ads is crucial for advertisers to achieve their desired goals.

So if you also go for creating display ads for your marketing campaign, I would like to suggest some strategies that you must surely implement to up your game from the beginner stage.

There are several strategies that can be used to achieve this, and some of the common efficient strategies are:

1. A/B testing

This strategy involves creating different versions of the same ad and testing them against each other to determine which one performs better.

And also allows advertisers to gather valuable insights into what resonates best with their audience and refine their ads accordingly.

2. Retargeting

Retargeting is another powerful strategy that involves targeting users who have already interacted with the brand or website in some way, such as by visiting the site or adding items to their cart but not completing the purchase.

And showing relevant ads to these users, advertisers can increase the likelihood of conversions and drive more sales.

Win-win!

3. Frequency Capping

Frequency capping is the practice of limiting the number of times a user sees a particular ad to prevent ad fatigue.

This helps to ensure that the ad stays fresh and engaging, and doesn’t become a nuisance to users who have already seen it multiple times.

4. Ad Placement

Ad placement is also an important optimization strategy, as it involves placing the ad in a strategic location on the website or app to increase its visibility and impact.

This may include placing the ad above the fold on a website, or in a prominent location within an app.

Optimizing where to place ads by analyzing the locations where ad works the best in conversion or attracting eyeballs is a great way to increase the CTR of ads from your website.

Ad Networks: Maximizing Your Reach and Revenue

By now, you should already know what are ad networks for, as we discussed above in the three steps of how do display ads work.

Still, let me give you a simple definition if you haven’t got clarity on this yet…

Ad networks are companies that connect advertisers with publishers who display their ads on their websites or mobile apps.

Some popular ad networks include Google Ads, Ezoic, AdThrive, and Mediavine.

Each ad network has its own unique targeting options and features, which we can discuss in a different article (as this one is already gotten so lengthy in the price of giving you a complete understanding of how display ads work exactly).

Let me give you a basic understanding of these networks, on the basis of popularity and eligibility:

1. Google Ads is the largest ad network and offers a wide range of targeting options, including search, display, and video ads. It not only covers ads on its own search engine but also on YT videos which accounts for a big percentage of the ads industry. For search engine ads, no eligibility is needed as a publisher.
2. Ezoic is a popular ad network for website owners and offers a variety of ad formats, including display, native, and video ads. It also uses artificial intelligence (AI) to optimize ads and increase revenue for its clients. No eligibility is needed as a publisher.
3. Mediavine is also a premium ad network that offers high-paying ad placements for website owners. As a publisher, you need to have at least 50,000 monthly sessions to be eligible to join their network, and they offer a 75/25 revenue split to publishers.
4. AdThrive is also a premium ad network that requires a minimum of 100,000 monthly page views, but offers higher earnings to their publishers, due to its exclusive partnerships with advertisers. It’s the most premium network to be enrolled in, which is my goal for the upcoming years to be able to monetize this site through that network (Haha… Ambitious me).

Last but not least…

Measuring Performance: Tracking Your Success with Key Metrics

At last, all ad campaigns boil down to the analytics part, to understand how well it went and what more could be improved in future campaigns.

Measuring the performance of display ads is crucial to the success of a campaign.

Some of the most commonly used metrics to evaluate the effectiveness of the ad are:

1. Impressions are the number of times the ad was displayed to users. Clicks are the number of times users clicked on the ad.
2. Conversions are the number of users who completed a desired action, such as making a purchase or filling out a form.
3. Click-through rate (CTR) is the percentage of users who clicked on the ad after seeing it.
4. Cost per click (CPC) is the amount of money an advertiser pays for each click on their ad.
5. Return on investment (ROI) is the amount of revenue generated from an ad campaign compared to the cost of running the campaign.

Advertisers can use these metrics to determine the effectiveness & success of their campaign and make adjustments to optimize performance.

We will go into more detail about measuring the performance of ad campaigns in another article on the display ads topic soon. Stay Tuned!

FAQs

Some FAQs that may answer your basic question related to how do display ads work. Hope you find it useful.

1. What is the difference between display ads and search ads?

Display ads are graphical advertisements that appear on websites, mobile apps, or social media platforms. Search ads are text-based ads that appear at the top of search engine results pages.

2. How can I ensure my display ads are reaching the right audience?

By using targeting options such as demographics, interests, and location, advertisers can ensure that their display ads are reaching the right audience.

3. Is it better to use one ad network over another?

The best ad network for a campaign depends on various factors, including targeting options, features, and pricing. Advertisers should research different ad networks and choose the one that best fits their campaign goals.

4. Can I create my own display ads?

Yes, advertisers can create their own display ads using various design tools or by hiring a professional graphic designer.

5. What are some common mistakes to avoid when running display ads?

Common mistakes include poor ad design, irrelevant targeting, ad fatigue, and not measuring performance. Advertisers should ensure they have a well-designed ad, relevant targeting, limit ad frequency, and track performance metrics.

Conclusion:

Display ads are a common type of online advertising that can be an effective way to reach the target audience and achieve marketing goals.

By understanding how display ads work, the different types of display ads, targeting options, ad networks, measuring performance, optimization strategies, and additional tactics for success, advertisers can create effective campaigns.

With careful planning, testing, and optimization, display ads can be a valuable part of a comprehensive digital marketing strategy.

I hope this article provided you with a clear understanding of how display ads work, and answered the questions/doubts you had about the process.

If you want to learn more about it, you can check out the top references I used to make this article.

Along with this, I have also listed 3 additional resources for you to gain more info on display ads and advertisements below.

Happy Learning!

My Research References For Writing This Article:

• Search Engine Journal: What Are Display Ads: A Complete Guide for Digital Marketers
• Ezoic: What Are Display Ads? A Beginner’s Guide to Display Advertising
• Neil Patel: Display Ads vs. Search Ads: When to Use Each to Get the Best ROI

Some Additional Resources on Display Ads:

• WordStream: The Big, Easy Cheat Sheet for Google Display Ads
• Neil Patel: 5 Hacks That Will Optimize Your Ad Campaigns
• Digital Marketing Institute: Digital Display Advertising Course Online

By utilizing the information in this article and additional resources, advertisers can create successful display ad campaigns. By understanding the target audience and utilizing effective ad design and targeting, display ads can effectively drive traffic and conversions. With continuous testing and optimization, display ads can continue to improve and meet the goals of the campaign.