An ad server is ad tech that allows websites and mobile apps to display ads. Ad servers store and serve ads and manage the creative components of ad campaigns.

The online advertising ecosystem can be complex, especially when it comes to programmatic advertising, and the ad server is an important piece.

Here’s how it works.

Advertisers use demand-side platforms (DSPs) and configure ad campaigns, using such tools as targeting, segmenting, budgeting, and bidding. In other words, marketers tell DSPs what they want to buy and how much they are willing to pay for it.

Publishers use supply-side platforms (SSPs) to list the inventory they have for sale, offering data for targeting and context, and set prices they are willing to accept.

In the middle is an ad exchange that plays a matchmaker between DSPs and SSPs.

When a user browses a site with ads, it sends an ad request. The ad exchange acts as a virtual marketplace, bringing together both supply and demand to buy and sell digital advertising inventory. The ad exchange looks at the ad inventory that’s on the site, looks for relevant ads to show, and facilitates real-time bidding (RTB). This all happens in milliseconds.

Once the winning bid is accepted, the ad server will deliver the most relevant creative, allowing advertisers to get their message out and monetization of publisher sites.

Publishers may also employ ad networks, which can aggregate inventory across multiple ad exchanges to maximize competition and bidding for available ad units. This tends to lead to higher cost per thousand (CPM) rates and fill rates.

Interested in learning more about boosting your ad revenues? Check out our related article, How to Increase Ad Fill Rates.

How Do Different Types of Ad Servers Work?

There are two types of ad servers:

1. First-party ad servers (known as publisher side or publisher ad servers)
2. Third-party ad servers (known as advertiser side or advertiser ad servers)

While both will handle ad management, both ad serving platforms have distinct differences.

The first-party ad server is used for designating ad placement, generating ad tags, inventory management, and serving the ads on publisher sites. The third-party ad server is used for targeting, campaign management, analytics, and ad optimization.

First-Party Ad Servers

A first-party ad server handles serving ads on publishers’ websites and apps. It is a physical piece of hardware that’s owned or operated by a publisher. Many publishers own their first-party ad server, which is a self-serve or self-hosted server. Other publishers will choose to outsource to a vendor for the ad serving process using a hosted ad server but will maintain control of the server.

This type of server allows publishers to manage their ad slots on their websites, along with the ad serving process, including the ad placement that they’ve sold directly to advertisers. In either case, first-party advertising ad servers will act as a management platform to decide what codes to service in the available ad units. This type of server will decide which ads to display and will also collect data such as ad impressions or the number of clicks.

The main goal of a first-party ad server is to help monetize a publisher’s digital property, automating the process of serving ads via the publisher’s web server. The data generated can help publishers track important metrics, such as inventory forecasting and revenue projections.

Here’s how first-party ad servers work:

1. When a user visits a website, the browser sends a request to a publisher’s web server to show the site.
2. The publisher’s web server renders the page and shows it to the user.
3. If the page contains ad units, the web server will be sent an ad request (ad call) to the publisher’s ad server to fill the ad unit.
4. The publisher’s ad server will choose the right ad to show based on user information and parameters set by both the publishers and advertisers.

After these four steps are completed, the first-party ad server will send an ad tag to the website telling it what to display and to track performance. It will show the appropriate ad. However, there are additional steps if a third-party ad server is also used.

Third-Party Ad Servers

Third-party ad servers are used by advertisers and agencies to manage ad performance and campaign management. They also work in concert with first-party ad servers, using application programming interfaces (APIs) to send data back and forth.

When an advertiser is awarded the winning bid for banner ads, native ads, video ads, or other ad formats, the first-party (publisher side) ad server will communicate with the third-party (advertiser side) server to grab the right creative for the ad campaign. Because ad tags are added by the publisher service, there are some limitations to the functionality.

For advertisers, however, the big benefit is collecting detailed campaign data to evaluate campaign performance and optimize advertising.

For third-party advertisers, the publisher’s ad server will still complete steps one through five. However, instead of showing the ad at this point, additional steps take place:

5. The first-party ad servers will send ad markup code for the ad unit, which points to the third-party ad server.
6. The ad markup triggers a request to the advertiser’s ad server.
7. The third-party ad server delivers the creative and sends the markup back to the publisher’s site to display the correct ads.
8. The first-party ad server shows the ad on the website or mobile app.

Comparing First-Party and Third-Party Ad Servers

First-party ad servers are used by publishers and it’s the start of the ad serving process. Third-party ad servers are used by advertisers to manage ad campaigns and creative details and to access campaign data and analytics.

Here’s a chart that shows you the key purpose, use, and value of each type of ad server.

	First-Party Ad Server	Third-Party Ad Server
Usage	Publishers	Advertisers
Purpose	Serve and manage digital advertising on publisher websites and mobile apps.	Manage creative and tracking for digital advertising appearing on publisher websites and mobile apps.
Value	Manage digital ad units on websites and mobile apps and optimize monetization.	Optimization of creative to maximize performance and provide independent tracking of digital ads.

It’s not necessary for publishers or advertisers to use an ad server. Instead, they can use ad exchanges and ad networks to fulfill that function. However, there are significant benefits that are worth discussing. Google Ad Manager, DoubleClick for Publishers (DFP), and Newor Media can all handle the ad serving and facilitate the entire digital advertising ecosystem.

The Benefits of Using an Ad Server

Let’s take a look at the benefits of using first-party ad servers for publishers and third-party ad servers for advertisers.

Publisher Benefits of First-Party Ad Servers

Publishers using first-party ad serving technology can leverage their first-party data to help optimize ad inventory, ad placements, and ad formats to increase effectiveness and increase ad revenue.

Publisher-side ad servers can also be an advantage when it comes to dealing with cookies. Ad blockers rarely block first-party domain requests and cookies, which improves the likelihood that ads will show even with an ad blocker in place. Also, users are less likely to clear cookies from websites they have already visited, allowing publishers to have greater insight into visitor behavior and ad targeting.

First-party ad servers also make it easier for advertisers to target clusters of users.

Some first-party ad servers also allow the creation of native ads in a self-serve mode. This lets publishers develop and manage creative elements that can blend with the look and feel of their sites.

Advertiser Benefits of Third-Party Ad Servers

Third-party ad servers provide significant benefits for advertisers, such as the ability to manage ad campaigns at a granular level. Advertisers can specify precise targeting and designate specific creative for audience segments. They can also configure strategies for media buying, such as frequency capping.

Because third-party ad servers work cross-platform, advertisers can also manage media campaigns that run in multiple places on one platform. In a typical ad campaign, for example, markets might be buying ad units from a variety of sources, including programmatic platforms such as DSPs, ad exchanges, and ad networks. They might also be buying some ad placements directly from website publishers or private marketplaces (PMPs).

Third-party ad servers let you control all of it from one platform and avoid having to manage campaigns separately or compile reports from different sources.

Ads are uploaded to one place and served to multiple traffic sources using ad tag scripts. This avoids having to manually upload creative elements to every place where you would want your ads to run.

Tracking ad performance is crucial for advertisers to evaluate ROI and effectiveness. With a third-party ad server, markets can audit the inventory with greater transparency. That data provides metrics for optimization, such as ad viewability by source. This can help advertisers create accept lists for high-performing sites and reject lists for poor-performing sites.

The granular level of detail allows an advertiser to continually refine its marketing strategies to improve conversions. For example, advertisers can manage A/B and multivariate testing of campaign elements within the third-party ad servers. This allows advertisers to automatically refine campaigns for better performance. You can also deliver dynamic ads that respond to data sources or specific events.

Creative optimization could be used in many ways, such as displaying dynamic content based on:

• Time: A restaurant may want to show breakfast ads in the morning, but switch to lunch specials or dinner menus later in the day.
• Weather: An outdoor venue may want to sell tickets when it’s bright and sunny, but switch to advertising gift certificates or future events when it’s stormy.
• Traffic patterns: On days with light traffic, amusement parks might want to offer today-only discounts.
• Dates: eCommerce stores can automate start and stop dates for specific products or offers.
• Location: A retail chain might offer localized offers or highlight regional products.

The best ad servers also allow more customization of rich media, which can be embedded into existing ad codes to display rich media ads on a web page.

Ad Server Pros and Cons

Regardless of whether a first-party ad server, third-party ad server, or both are used in the digital ad ecosystem, there are advantages and disadvantages to using ad servers.

Advantages of Using an Ad Server

• Platform-agnostic: Ad servers work across multiple platforms, ensuring compatibility.
• Multiple formats: Ad servers can accommodate multiple ad formats efficiently. For example, image ads can be created in multiple sizes and compression rates for different devices and displays. Video ads in ad servers are automatically converted into ad-serving formats such as MRAID, VAST, and VPAID. They can also handle rich media and HTLM 5 elements. 
• Flexibility: Once set up, campaigns are easy to manage. Since most of the process is automated, it makes management simpler while allowing for flexibility to make changes based on performance.
• Performance: Publishers and advertisers can quickly see if performance issues arise. Ad servers can also adjust ad delivery based on performance to show the highest-performing ads or the ads that generate the most revenue for publishers.
• Targeting: Robust targeting tools can help manage campaigns more effectively, taking into account advertiser requirements, geography, device, browsers, connectivity, etc.
• Reporting: Ad servers provide real-time tracking allowing everyone in the digital ad infrastructure to evaluate and optimize performance.

Disadvantages of Using an Ad Server

• Management: Ad servers take time to set up properly, especially when first deploying them or when making changes to ad units. Publishers, web developers, and ad sellers must work together to coordinate efforts.
• Load Time: Depending on location, such as where ad servers are hosted, web pages can experience some latency in loading ads. This can impact the user experience. That’s why it’s crucial to work with top ad servers.
• Cost: There’s also the cost of ad servers. Smaller advertisers or publishers may not be buying or selling enough advertising to justify the extra expense when there are other alternatives, such as using an ad network that handles transactions and delivery.

Types of Ad Servers

There are multiple types of ad servers, although today’s generation of ad tech generally combines all of these functionalities into one platform.

• Display Ad Servers handle banner ads, allowing advertisers to control the creative and publishers to control the placement and display.
• Mobile Ad Servers optimize ads for mobile viewing.
• Video Ad Servers run both in-stream and out-stream ads. They can also facilitate pre-roll, mid-roll, and end-roll video ads within publisher websites or mobile apps.
• Native Ad Servers allow the design of content that fits into the look and feel of publisher websites, meeting publishers’ specifications.
• Rich Media Ad Servers allow for creative that uses multiple audio, image, or video files. While not supported by all ad servers, some ad servers can provide detailed tracking of user behavior and level of interactivity with rich media ads.

Conclusion

Ad servers deliver the most relevant and high-performing content. They benefit both advertisers and publishers alike and play an important role within the digital advertising ecosystem. They help advertisers target the right audience with the right creative and allow publishers to optimize the monetization of their websites.

A first-party ad server works on the publisher side, allowing for control of various elements. A third-party ad server works on the advertiser side, giving advertisers control of creative elements, targeting, and reporting.

The ad tech experts at Newor Media work with hundreds of publishers every day to maximize their revenue and can help you navigate the complex infrastructure required to monetize your site and optimize revenue. Using algorithmic real-time bidding, machine learning, and header bidding strategies, Newor Media can maximize programmatic revenue for publishers.

Newor Media also provides hands-on support to help ensure optimal performance from ad units without compromising the user experience. This includes making sure you are running the right types of ad units with optimized ad placements on your site to generate the most revenue.

If you have questions about ad servers or want to grow your digital advertising revenue, reach out to our expert team today, or try the free website earnings calculator to see how much you could be earning by partnering with Newor Media.