An advertising network or ad network is a company that connects web sites that want to host advertisements with advertisers who want to run advertisements. Increasingly Ad networks are companies that pay software developers as well as web sites money for allowing their ads to be shown when people use their software or visit their sites..

Online advertising inventory comes in many different forms. This inventory can be found on websites, in RSS feeds, on blogs, in instant messaging applications, in adware, in e-mails, and on other sources.

Some examples of advertising inventory include: banner ads, rich media, text links, video and e-mails.

An advertiser can buy a run of network package, or a run of category package within the network. The advertising network serves advertisements from its ad server, which responds to a site once a page is called. A snippet of code is called from the ad server, that represents the advertising banner.

Large publishers often sell only their remnant inventory through ad networks. Typical numbers range from 10% to 60% of total inventory being remnant and sold through advertising networks.

Smaller publishers often sell all of their inventory through ad networks. One type of ad network, known as a blind network, is such that advertisers place ads, but do not know the exact places where their ads are being placed.

In most cases, ad networks deliver their content through the use of a central ad server.

Large ad networks include a mixture of search engines, media companies, and technology vendors.

There are three types of online advertising networks:

Representative (or Rep) Networks

They represent the publications in their portfolio, with full transparency for the advertiser about where their ads will run. They typically promote high quality traffic at market prices and are heavily used by brand marketers. The economic model is generally revenue share. 

Blind Networks

These companies offer low pricing to direct marketers in exchange for those marketers relinquishing control over where their ads will run. Blind networks achieve their low pricing through large bulk buys of typically remnant inventory combined with campaign optimization and ad targeting technology. The financial model is arbitrage.

Targeted Networks

Sometimes called “next generation” or “2.0” ad networks, these focus on specific targeting technologies such as behavioral or contextual. Targeted networks specialize in using consumer click stream data to enhance the value of the inventory they purchase.

There are two types of advertising networks: first-tier and second-tier networks

First-tier advertising networks have a large number of their own advertisers and publishers, they have high quality traffic, and they serve ads and traffic to second-tier networks. Examples of first-tier networks include the major search engines. Second-tier advertising networks may have some of their own advertisers and publishers, but their main source of revenue comes from syndicating ads from other advertising networks.

While it is common for websites to be categorized into tiers, these can be misleading. While Google is in the clear majority of advertisement impression served, other networks that could be labeled as tier 2 actually dominate over these tier 1 ad networks as far as the number of customers reach.

Ad serving describes the technology and service that places advertisements on web sites. Ad serving technology companies provide software to web sites and advertisers to serve ads, count them, choose the ads that will make the website or advertiser most money, and monitor progress of different advertising campaigns.

An ad server is a computer server, specifically a web server, that stores advertisements used in online marketing and delivers them to website visitors.

The content of the webserver is constantly updated so that the website or webpage on which the ads are displayed contains new advertisements -- e.g., banners (static images/animations) or text -- when the site or page is visited or refreshed by a user.

In addition, the adserver also performs various other tasks like counting the number of impressions/clicks for an ad campaign and report generation, which helps in determining the ROI for an advertiser on a particular website.

Ad servers come in two flavors: local ad servers and third-party or remote ad servers. Local ad servers are typically run by a single publisher and serve ads to that publisher's domains, allowing fine-grained creative, formatting, and content control by that publisher. Remote ad servers can serve ads across domains owned by multiple publishers. They deliver the ads from one central source so that advertisers and publishers can track the distribution of their online advertisements, and have one location for controlling the rotation and distribution of their advertisements across the web.

The typical common functionality of ad servers includes:

Uploading advertisements and rich media.

Trafficking ads according to differing business rules.

Targeting ads to different users, or content.

Tuning and optimization based on results.

Reporting impressions, clicks, post-click & post-impression activities, and interaction metrics.

Advanced functionality may include:

Frequency capping so users only see messages a limited amount of time. (Advertisers can also limit ads by setting a frequency cap on money-spending).

Sequencing ads so users see messages in a specific order (sometimes known as surround sessions).

Excluding competition so users do not see competitors' ads directly next to one another. (Usually done by bidding on keywords).

Displaying ads so an advertiser can own 100% of the inventory on a page (sometimes known as Roadblocks).

Targeting ads to users based on their previous behavior (behavioral marketing or behavioral targeting).

One aspect of ad serving technology is automated and semi-automated means of optimizing bid prices, placement, targeting, or other characteristics.

Significant methods include:

Behavioral Targeting - Using a profile of prior behavior on the part of the viewer to determine which ad to show during a given visit. For example, targeting car ads on a portal to a viewer that was known to have visited the automotive section of a general media site.

Contextual Targeting - Inferring the optimum ad placement from information contained on the page where the ad is being served. For example, placing Mountain Bike ads automatically on a page with a mountain biking article.

Creative Optimization - Using experimental or predictive methods to explore the optimum creative for a given ad placement and exploiting that determination in further impressions.

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