Ad Tech 101: All You Need to Know About Ad Technology in 2020
You run ads, then ads run the world. All the kudos goes to brands, but an invisible force, unheard by the majority, keeps the lights on. It's lucky that you know about it, but that's just the start. Today, we'll fully explore the godlike powers of ad tech.
I dare say, ad tech software is the most miraculous advent for online entrepreneurs of all kinds. Without ad technology, Google and Facebook would never reach 10-figure revenues, millions of brands would sink into oblivion, and we'd have to pay for every second app we have on our iPhone — there'd be no way to monetize them all.
How did all this become possible? To figure this out, let's take a closer look at what ad tech is, its trends, and define the preferred ad tech stack for your business.
Definition: What is Ad Tech?
Ad tech is an umbrella term for advertising technology. It includes a set of software and tools used by advertisers, ad agencies, publishers, and other industry players for strategic planning and management of their advertising or monetization activities.
Brief History and Role of Ad Technology
Looking back 20 years, advertising technology has become a revolutionary breakthrough in improving the effectiveness of advertising. The rapid development of e-commerce led ad agencies to help their clients place ads on websites that would bring them maximum return on investment (ROI).
The first harbinger of the digital revolution in advertising was the invention of the first ad server in 1995 by FocaLink Media Services. It was followed by the success of Doubleclick, an ad network and ad server rolled into one which would later become the Google Ad Manager. Ad serving technology meant the end of manual ad placement — and the beginning of the era of automated advertising.
From the launch of Google AdWords and first ad exchanges to the rise of real-time bidding — it's been a long haul. An ad tech ecosystem was enriched by DSPs, DMPs, SSPs, etc. It will add up a number of other ad tech solutions like CDPs and 1st-party tracking platforms after the future shutdown of 3rd-party cookies that will be completed by 2022.
As for the major role of ad tech in today's advertising industry, here are three highlights:
Programmatic Advertising in Ad Tech
We all unwittingly associate ad tech with programmatic advertising. Even though programmatic is part of an ad tech ecosystem, the selection of available solutions is not limited to programmatic platforms. Yet, programmatic came out as a game-changer in the ad tech industry, adding a deeper layer to ad campaign targeting and optimization.
Programmatic advertising allows publishers and advertisers to buy and sell traffic automatically instead of negotiating prices directly. It helps advertisers reach a wider, yet relevant audience due to smart targeting algorithms of programmatic platforms, while publishers can sell their inventory at the best possible price.
The automated programmatic approach is opposed to direct media buying, which is mostly manual. The ad serving process here is based on a real-time bidding protocol.
This means that publishers use a supply-side platform (SSP) to list their inventory. When someone visits the publisher's website, the SSP forwards the ad request to a demand-side platform (DSP), which is an advertiser's tool to manage ad campaigns.
A DSP initiates an RTB auction, during which advertisers with matching targeting preferences bid on inventory. The highest bidder wins, and their ad is shown on the website. The whole process happens in a flash, so there is usually no latency in web page load.
Advertising campaigns can be auto optimized in the demand-side platform, so the setup takes much less time than using other ad platforms. One way or another, the advertiser gets ample opportunities for targeting and showing ads to the right people at the right time.
Ad Tech vs. MarTech: The Difference
Ad tech is often confused with marketing technology, as the two industries intersect. Some people see advertising as part of an overall marketing strategy, and in a broad sense, it is. In a narrower sense, there is a difference between marketing and advertising.
Both marketing and advertising are promotional activities. Yet, advertising mostly implies sponsored content, so the brand always pays for placing their ads on any channel, whether it is another website, social media, or connected TV.
Marketing is more about the holistic approach to promotion. Marketing starts with defining your unique selling proposition, buyer personas, and right channels where you'll promote your product/services. The major goal here is to learn your audience, deliver the right message, and bring more leads to your sales team. The marketing strategy includes a mix of activities, one of which is advertising.
Speaking of ad tech vs. martech, the relations between them are mostly the same. Advertising technology is a part of the marketing tech stack usually used by large brands.
Still, going deeper into ad tech, you should draw a line of distinction from martech in the narrow sense. Ad tech is used to set up, launch, and manage advertising campaigns as well as sell and handle inventory on apps or websites.
Besides ad tech, marketing technology includes a wide range of marketing tools for automation, A/B testing, message personalization, data analysis, SEO, social media management, etc. Here is a handy table illustrating the difference between ad tech and martech:
|Use cases||Paid ad campaigns||Unpaid methods of promotion|
|Purpose||Facilitate media buying, optimize user's ad spend or monetization revenue||Facilitate overall marketing strategy implementation, automate routine marketing processes.|
|Channels||Display advertising, video advertising, PPC, social media advertising, CTV, DOOH||Social media, email, direct sales, video marketing, conversational marketing, content marketing|
|Targeting||Based on 3rd-party data, temporary and approximate visitor profiles, unknown recipients||Based on 1st-party data, users are already identified and have permanent yet updated profiles|
|Pricing||Fixed monthly fee, ad spend commission, hidden bid markups||Fixed monthly or yearly fee|
|Users||In-house media buyers, ad agencies, website owners, app developers, ad networks||In-house marketing teams, sales teams, freelance marketers of all kinds|
|Examples||Ad server, demand-side platform, data management platform||Email marketing automation platform, social media scheduling tools, chatbots|
The further away, the blurrier the distinctions between ad tech and martech. For example, a customer data platform has great potential to be used in advertising, although traditionally it's a tool for sales and marketing. That's why I included it in my list of ad tech software types.
Ad Tech Ecosystem: Types of Ad Tech Software
An ad tech ecosystem (sometimes called an ad tech landscape) is a collective name of the realm that encompasses all ad tech solutions, industry players, and connections between them.
Just like veins and arteries carry blood to and from the heart, streams of supply and demand embody the intentions of advertisers and publishers. To achieve their goals, both of them use different tools. Publishers use a 1st-party ad server or a supply-side platform (SSP) to handle their inventory, while advertisers are for campaign management.
Ad networks and ad agencies can be ad tech software providers and customers of existing ad tech vendors at the same time. For example, an ad network can use a white-label ad server with its full functionality and create restricted accounts for their clients within the platform. Ad agencies can buy traffic with a demand-side platform and provide media buying services to the advertiser, etc.
Historically, ad servers were used to host and store ads, and eventually serve them on the publisher's website. Today, they evolved into ad tech platforms for launching ad campaigns, managing website placements, or matching publishers and advertisers in a single interface.
Ad server also helps to collect data on key metrics to optimize campaigns. Without ad servers, the entire process of media buying and selling would have to be carried out manually by changing the HTML-code of the website. Here, the ad serving process is still based on direct media buying with ad tags, and rarely on RTB, but targeting and most parts of optimization occurs automatically.
Learn more about an ad server with a complete ad server guide.
Demand-side Platform (DSP)
Demand-side platform (DSP) is a platform that allows users to purchase inventory from various ad exchanges and supply-side platforms (SSPs) in a specially designed interface. A DSP is a crucial element in real-time bidding (RTB), where it serves as a receiver of a browser's request for ad serving.
The cool thing about a DSP is that it offers even more automation than an ad server — here you don't have to negotiate prices with publishers directly. Instead, you set your targeting preferences, CPM, and launch the campaign. And the best part: bidding rules, multipliers, and other optimization tools that spare you from babysitting your media buying.
There are two options for advertisers — use a self-serve DSP from the ad tech provider or buy a white label ad tech platform and get full control over their advertising. A white-label DSP is a SaaS solution that can be customized and branded as your own. Unlike a self-service DSP, a white label solution can also be integrated with custom SSPs. That means that you'll be in charge of where your traffic comes from, and get all the data transmitted from publishers.
Learn more about a demand-side platform with a complete DSP guide.
Supply-side Platform (SSP)
A supply-side platform (SSP) is the reverse side of a DSP. It's a piece of ad tech software designed for publishers. By using this ad tech solution, publishers can manage, sell, and optimize inventory on their websites and mobile apps.
Just like a DSP, an SSP is based on an RTB protocol, which means that the publisher embeds an ad tag or a header to their web pages, so the user's browser could request the ad each time someone visits the website. Then, the tag will be sent forward to the SSP, which will process the publisher's data and request a suitable ad from the DSP to show it on the website.
A DSP will match the publisher's audience with the advertiser's targeting, choosing the highest bidder in the process. The highest bidder brings the publisher max possible revenue with minimal effort from the supply side.
Agency Trading Desk (ATD)
An agency trading desk is a set of tools provided by media agencies for planning, buying, and managing the advertising on various channels. We can say that this is a simplified version of the demand-side platform for those who are not ready to invest in a DSP or an in-house team at the moment. The ATD employs staff that substitutes in-house media buying teams.
The drawback of this ad tech solution: advertisers who use ATD services do not have direct access to the inventory.
Ad exchanges serve as middle links in real-time bidding. They are mostly used by large ad tech providers to connect DSPs to suitable SSPs and vice versa. Even though publishers and advertisers rarely have direct access to the ad exchange, their traffic and inventory usually passes through the platform before getting to its final destination.
On the way from the advertiser and publisher, both traffic and inventory can be acquired by ad networks, which will further use them for their own purposes. Summing up, an ad exchange is an open marketplace of impressions, where all existing RTB players match with each other.
Data Management Platform (DMP)
The data management platform allows advertisers to gain in-depth knowledge about their customers' behavior. Advertisers use DMP to collect data from various sources — tags on websites and mobile apps, cookies, APIs, and S2S integrations. DMPs utilize 3rd-party cookies to create temporary user profiles and segments to make behavioral targeting in a DSP or ad server possible.
Customer Data Platform (CDP)
Customer data platform collects not only 3rd-party data, but also user info provided by consent (i.e. 1st-party data). This data is also called PII (personally identifiable information), which means that a CDP creates a unified customer profile with a known name, company, email, etc. CDP collects these attributes from web and mobile analytics tools, CRM, transactional systems, subscriptions and newsletter signups.
In the past decade, CDPs were mostly used by marketers to consolidate data about their leads and customers. Yet, in 2022, when 3rd-party cookies will be completely phased out by Google, ad tech software will also adopt this approach to data collection. With no access to 3rd-party data, ad tech vendors and networks will have to find a way to retrieve 1st-party data from users, and a CDP might be a pretty good shot in this battle.
Inventory and Ad Quality Scanning Tools
Ad fraud is still flourishing: it impacts around 37% of ads. Some traffic sources consist mostly of bots, while unscrupulous advertisers contaminate websites with malicious ads that put websites under threat. Inventory can also be sketchy: no one wants to see their ads placed on a low-authority website with scam content.
Inventory and ad quality scanning tools are ad tech solutions which help to avoid both threats. Before being served on the website, the ad should be verified with an ad quality scanning tool, and vice versa. For example, Epom DSP uses the GeoEdge solution to weed out dubious creatives and protect our partners from the supply side.
Ad Tech Industry Trends
We've already looked back at the ad tech industry in the early 2000s, now it's time to move forward and see what awaits us in the nearest future. Here are some of the latest ad tech industry trends:
AI and ML Impact on Programmatic Advertising
Artificial Intelligence (AI) and Machine Learning (ML) will help advertisers analyze large amounts of data that will more accurately predict the results and the path of an individual user to make a purchase.
AI can process data faster than the human brain, and its influence on ad tech will increase. It will be able to correlate user data with when and where the advertisement is showing, to suggest when and in what format to place ads. AI will significantly increase the effectiveness of advertising, thereby reducing customer acquisition costs.
Digital Out Of Home (DOOH) Based on Mobile Location Data
This trend has intensified over the past few years and will evolve in 2020. Digital OOH advertising based on mobile location data could be the final puzzle piece in the user journey between online and offline advertising channels. DOOH will help improve the customer experience and increase conversions in the offline world, thanks to advertising technology.
Growth of Programmatic TV, Podcasts and Audio Programmatic
Here we can see a paradigm shift in digital content consumption as we move from a traditional cable connection to over-the-top (OTT) services such as Netflix or Amazon Prime. And while this transition is taking place, advertisers need to make the most of both channels using programmatic advertising.
Since the consumption of multimedia content is combined on the web (mobile devices and connected to the Internet TV), a programmatic approach to television based on data will be increasingly important in the purchase and delivery of advertising to consumers.
How to Choose the Right Ad Tech Solution for Your Business
Depending on the type of advertising business, your ad tech stack will vary. Publishers obviously don't need a demand-side platform to thrive, while ad networks don't have to build their own ad exchange to scale. Below, I will tell you which tools you'll inevitably need if you want to outgrow your competition in the long term.
Ad Tech Stack for Networks
The major goal of ad networks is to match publishers and advertisers and help them make the most of their ad serving. Let's see which ad tech tools are a must-have for networks.
Ad server. An Alpha and Omega of an ad network. As most ad networks have direct connections to their clients, an ad serving platform is exactly what they need to streamline the process of client management. A white-label ad server is one of the most sophisticated ad tech tools with customizable targeting, rules and permissions, powerful API, and 800+ other features.
Learn more about a white-label ad server.
DSP & SSP. Even though ad servers usually have RTB integration, some networks rely heavily on programmatic media buying. If you're one of them, consider setting up a white-label DSP, SSP, or both, if you deal with both supply and demand partners directly. A white-label programmatic platform allows you to unite all SSPs and DSPs in one place and saves up to 30% of your ad spend, while skipping middle links in ad tech vendors.
Learn more about a white-label DSP.
Data management platform. Ad networks can enrich their campaign targeting with additional data by connecting their DSPs and ad servers to the data management platform. DMPs can combine both 3rd-party data that you can collect using cookies and 1st-party data derived directly from companies you're working with.
Ad exchange. There is no need to build your own ad exchange, but ad networks may directly buy traffic and inventory from ad exchanges that belong to prominent ad tech brands.
Inventory and ad quality scanning tools. Those ad tech solutions which help ad networks maintain a good reputation and minimize fraudulent traffic and inventory coming through their platform.
Ad Tech Stack for Agencies
Ad server. Small ad agencies usually don't need it, but if you run a large ad agency that not only creates advertising strategies, but also runs ad campaigns on behalf of your clients, you can try a basic or standard plan of an ad server. Little chance that you'll regret it!
DSP. The same is true about DSP. However, ad agencies rarely need a white-label solution and can go for a self-serve DSP if the number of impressions of their ad spend doesn't exceed tens of thousands of dollars.
Learn more about the difference between a white-label and a self-serve DSP.
ATD. This platform streamlines the agency's communication with clients. Agencies can offer their advertising services with an agency trading desk. It makes sense to build your own ATD or utilize a white-label solution from an ad tech company.
Inventory scanning tools. Similar to ad networks, ad agencies have to maintain the high quality of inventory they offer to their clients.
Ad Tech Stack for Advertisers/Brands
Ad server. This ad tech software helps your brand take advertising in-house. Especially beneficial if you have direct publisher connections and already know which websites you'd like to serve your ads.
DSP. You can use a white-label DSP, if you want to implement a hardcore programmatic in-house strategy. This way, you'll take over all media buying activities and will be able to make the most of your ad campaigns with the least money spent.
DMP. Is there any brand that wouldn't like to learn more about their audience? A DMP can handle it, while significantly increasing the effectiveness of your ad campaign.
CDP. In the post-cookie era, a CDP may substitute a DMP.
Ad quality scanning tools. To make sure your ads don't violate any policies and are malware-free, you can verify them with these ad tech solutions.
Ad Tech Stack for Publishers/App Developers
Ad server. If you have several websites and/or apps under one umbrella, you may benefit from having an ad server under that same umbrella. With this ad tech software, publishers can connect multiple demand partners and manage all monetization campaigns in one interface.
SSP. This platform is similar, with the exception of selling your inventory programmatically. This means less hassle for you, as you don't have to look for direct partners and negotiate placement conditions with them. All you need to do is specify your requirements, desired price floor, and list your inventory in an SSP.
Inventory scanning tools. Prove yourself as a reputable partner for your demand counterparts: scan each placement and make sure that you don't have any technical issues on your website.
Ad Tech: Brief Summary
- DEFINITION: Ad tech software toolset takes your advertising to a new level. It's a “win-win” solution for media-buying and -selling for publishers and advertisers
- ROLE: Ad tech allows the integration of the whole toolset into a single system. Multiple automated processes enable more accurate and prompt audience targeting. Owing to that, it's possible to collect multifarious data that will result in highly relevant and well-directed ads.
- SOFTWARE: To achieve your advertising goals, there is a range of software that the ad tech ecosystem includes. It depends on your needs and could be provided by the key components of the ad tech supply chain such as the ad server, ad exchange, agency trading desk, demand-side and supply-side platforms, and ad networks.
- TRENDS: The future of ad technology has already come. In 2020, advertisers will increasingly use AI and ML data analysis, TV and audio programmatic ads, as well as DOOH based on mobile location. If you follow these trends, your digital advertising will certainly be accurate and cost-effective.
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