What Is an Ad Server and How Does It Work?

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From time immemorial, ads for products and services have been a valuable commercial tool to the company, businesses, and industries. Before the invention of the internet, ads were manually displayed and sometimes printed on newspapers, banners, displays, and magazines.

However, after the invention of the internet, as more and more people spend their time on numerous web pages, the demand for a new type of ad campaign[14] is required. This new type of ad campaign is now what we call online ads or ads on different web pages.

Considering the growing demand for a huge number of ads on web pages, the idea of an ad server came into mind 27 years back in 1995, when Dave Zinman, Andrew Conru, and Jason Strober first set up an ad server named FocaLink Media Services.

Today, ad serving has become so much more sophisticated. Modern ad servers[6] can run thousands of ads at the same time and are sophisticated enough to accurately track how often a website receives a certain ad. The process is automated and remarkably efficient from both a financial and operational standpoint.

In this article, we will be exploring what an ad server is, what it does and how it works to help you understand the process.

What Is an Ad Server?

An ad server is a piece of technology that helps advertisers (e.g., publishers, agencies, and ad networks) manage their online advertising efforts across multiple websites and devices.

In simple terms, an ad server allows advertisers to upload and store their creative[15] assets for use in digital ads. It also helps them get those ads in front of users by managing the frequency[16] and placement of ads on specific sites or devices. 

Additionally, an ad server collects different data on the viewers through impressions and clicks, and it is able to get an insight into the viewers. In this way, the publishers and the advertisers can know their what-to-do lists for a future ad campaign.

How Does an Ad Server Work?

An ad server works by seamlessly connecting the publishers and advertisers. It receives creative content from advertisers, which can be anything from display banners to video or mobile ads. This includes the guidelines for how and where these ads should be placed, such as targeting[17] specific website URLs or specific audiences.

The ad server also receives inventory[18] from publishers, which is a fancy word for “ad space”. This includes guidelines for where ads can appear on the publisher[19]’s website and what types of ads can be displayed there.

Once the creative content and inventory have been received, the real magic of the ad server happens. When you as a customer visit a website or open an app, the site’s code-called “tags”- ping an ad server asking for an ad. The server then uses its own data points, such as your IP address, to find out who you are and what you might be interested in buying. If you’ve visited that site before, it can even use your browsing history to figure out what products you’ve looked at and what interests you might have.

Then after it’s done collecting information about you and matches the creative content with the inventory, it decides which ad is best for you and then sends that ad back to the site or app. Then the site or app displays the ad in a designated spot wherever you are online, and when you click on an ad, it usually goes to a landing page hosted by either the advertiser[7] or publisher.

Ad Servers: First Party vs Third Party

There are two types of ad servers: first party and third party[8]. A first-party[9] ad server is used by publishers to serve ads to their own website, while a third-party ad server can be used by advertisers to target visitors across multiple websites that have partnered with that ad server provider.

First Party Ad Server

A first-party ad server helps a publisher manage, deliver and track online advertising. It can also be referred to as a “web ad server,” “an ad server”, or a “publisher’s ad server.”

It refers to the fact that the publisher is using their own ad server to serve ads on their site. The publisher may be the owner of the website on which the advertisement appears, or it may be an organization facilitating the advertising on behalf of an advertiser. 

A first-party ad server is responsible for targeting, collecting, and integrating data, reporting, and serving ads.

What Are the General Activities Done by the First Party Ad Server?

The general activities of the first-party ad server include:

  1. Manage the publisher’s website and mobile app inventory.
  2. Enable publishers to create and manage ad campaigns, creative assets, and other campaign elements.
  3. Establish pricing for each advertising unit on the publisher’s website or app.
  4. Track and report metrics such as clickthrough rate, impressions, conversion rate, or cost per acquisition[1].

Third-Party Ad Server

The third-party ad server is the advertiser’s ad server; when a customer opens a webpage, the webpage’s ad slot sends the command to the first-party ad server to show the ads. Then, the first ad server asks the third-party ad server to provide the data of its ads from its available ads inventory.

It allows marketers to manage the ads they want to place on their websites. It is typically utilized by large companies with multiple websites, who often buy and sell advertising space through an ad network[10]. The two main functions of third-party ad servers are tracking performance[11] and reporting results back to the advertiser.

What Are the General Activities Done by the Third-Party Ad Server?

The third-party ad server is responsible for performing several functions in the process of digital ad delivery, including:

  1. Track impressions, clicks, and conversions – which will allow you to measure the effectiveness of your campaigns.
  2. Serve ads directly to websites or apps. 
  3. Sets up the campaign and then delivers it on a CPM[2] or CPC[12] basis.
  4. Optimize the performance of campaigns based on performance metrics.
  5. Provide reporting on campaign performance metrics so that you can easily track your results.

Hosted vs Self-Hosted Ad Servers

Advertisers and publishers often wonder what kind of ad server would be best for their advertising goals: hosted vs Self-Hosted Ad Servers.

What’s the difference between hosted and self-hosted ad servers? A lot.

Hosted ad servers are software platforms that are operated by a third party and accessed over the internet. These platforms store, serve and deliver your ads to a website or app. They also provide additional data, like impressions, clicks, and conversions.

The biggest advantage of a hosted ad server is that it won’t cost much to get started. The downside is that you won’t have much control over the advertising.

The most popular hosted ad servers include Google Display Network, AdSense, and Facebook Instant Articles Ads, Manager.

On the other hand, self-hosted ad servers are software platforms that you host on your own platform. This means you need to set up a server and build your ad delivery system from scratch.

The advantage here is that you own all the data and have full control over it – but it also requires a lot of technical know-how that many businesses don’t have in-house.

The most popular self-hosted ad servers include OpenX Ad Server, Amazon S3 / CloudFront, OAS – Open AdStream, and OpenX – now Revive Adserver.

Top Ad Server: Google Ad Manager

Are you looking for a top ad server? Try Google Ad Manager[3]!

Google is known for its ability to deliver highly-targeted, profitable ads. The company has been serving ads for a long time and has kept up with the market by providing ad management systems that are efficient and effective.

What Is Google Ad Manager?

Google Ad Manager (GAM[4]) is an ad server that allows users to manage ads across different sites and platforms. GAM is widely considered to be the top ad server in the industry, and it’s a favorite among advertisers, publishers, and agencies alike. 

It lets you manage and sell your ads with ease while also providing analytics to help you get the most out of your campaigns. It can also be used with other tools like Google Campaign Manager, Google Analytics[5] 360 Suite, and more.

Why Should You Choose Google Ad Manager?

You’ll save yourself a lot of headaches by using Google Ad Manager from the start. Google Ad Manager has so many benefits that it’s hard to know where to start.

One big benefit is that you’ll be able to manage all your campaigns for all your different clients in one place and serve ads across multiple channels. You will also be able to control which ads are shown based on various criteria, such as geography, time of day, device type, etc.

Some other great features are the ability to see how much each campaign is earning in real-time and the ability to track the performance of each ad in detail. This means you can make changes on the fly if something isn’t working or adjust your strategy based on what you’re learning.

This all adds up to a much more efficient system that saves you time and money while giving you peace of mind that all your ads are running smoothly at all times. If you’re looking for a top-tier ad server, Google Ad Manager is a great option.

How to Decide Which Ad Server Is Right for You?

When you’re looking to get started with an ad server, you have a lot of options. Here are five features to look for when choosing the right one for your site.

1. Efficiency: The ad server should have the ability to track all of your ad campaigns, regardless of where they are running. This will allow you to get a full picture of how your campaigns are performing, so you can make informed decisions about their future performance.

2. Compensation Plan: An ad server should have a compensation plan that aligns with your business goals and objectives. Look at their pricing structure, what kinds of metrics they track (and how often!), and choose one that’s right for you!

3. Underlying Technology: The technology behind an ad server is important because it determines how fast ads load on the site and how well they perform across different devices (e.g., mobile vs desktop).

4. Continuous Support: It doesn’t matter how good an ad server is if there isn’t someone available to help you troubleshoot problems when they arise, so make sure that they offer 24/7 support!

Frequently Asked Questions

What is an ad?

The definition of an ad is a paid announcement that markets a product, service, or brand. Ads are usually found on the internet, in newspapers and magazines, on the radio, and on television. They can be short or long, written or visual.

What does an ad server do?

An ad server is a piece of software that stores and delivers advertisements, which are usually created by a creative agency or ad network. It handles the details of where, when, and how advertisements are delivered to users on the Internet. It can deliver ads based on user behavior and country, as well as manage targeting and frequency capping.

How much does it cost to build an ad server?

Building an ad server is expensive. The cost of initial development, in addition to the cost of hiring employees to manage and maintain the server, will be at least $750,000 per year.


As you can see, ad servers are crucial for maintaining the back end of any display advertising[13] system. They have the capabilities and flexibility to maintain a variety of display networks, so they’re an essential piece of the puzzle when it comes to maintaining a well-oiled display marketing campaign. Whether you’re new to the world of display advertising or you’ve been working with it for years, understanding this basic element that all advertising management is built on is crucial to maximizing your ROI and achieving your company’s campaign goals.

1. cost per acquisition. Cost per action/acquisition. A payment model in which advertisers pay for every action, such as a sale or registration, completed as a result of a visitor clicking on their advertisement. Note that an "acquisition" is the same as a "conversion".
2. Cost Per Mille/Thousand [CPM] ( CPM ) Cost per mille, or thousand (mille = thousand in Latin). A pricing model in which advertisers pay for every 1000 impressions of their advertisement served. This is the standard basic pricing model for online advertising. See also CPC and CPA.
3. Google Ad Exchange ( Google Ad Manager ) Ad Exchange is often referred to as the premium version of AdSense, and also a Google-owned ad network of sorts. To join Ad Exchange, publishers need to meet specific requirements such as 500 000 minimum monthly traffic, be invited or join through a Google certified partner. Recently Google has rebranded this product, and it is now called Google Ad Manager.
4. Google Ad Manager ( GAM ) Google Ad Manager is a combination of both Google Ad Exchange and DoubleClick For Publishers as a unified platform that provides publishers with ad serving services.
5. Google Analytics. This is Google’s traffic tracking and analytics tool that gives publishers insight into traffic origins, popular pages on their website and much more.

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