How do digital ads work?
There is no one answer to the question, "How do digital ads work?" With the wide variety of digital ad formats, you can find ads that are simple to create and publish, as well as ads that require more complex tools. There are also ad types for all levels of budget, with different pricing models and targeting methods.
Publishing digital ads
How digital ads are published is determined by the specific type of ad. With some ads, you can purchase advertising inventory—the space for ads on a given website, or publisher—directly from the publisher. For example, Sponsored Brands and Sponsored Products are ads that appear only on Amazon.
Digital ads can also be purchased programmatically. Programmatic advertising is the automated buying and selling of digital advertising inventory, including display advertising and video advertising. You can use a demand-side platform (DSP), which is software that automates purchasing and management of digital advertising inventory from multiple publishers. A supply-side platform or sell-side platform (SSP) is software used by publishers to automate the sale and management of their advertising inventory.
Cost of digital advertising
The cost of digital advertising also varies by format. A common type of pricing is cost-per-click (CPC), or pay-per-click (PPC), which is a pricing model where you pay each time someone clicks your ad. Another type is cost-per-mille (CPM), which means cost-per-thousand-impressions. This is a pricing model where you pay a certain amount for 1,000 impressions, or times your ad appears.
You might also pay using other models, such as paying each time your ad leads to a desired action (e.g., someone signs up for your email list or downloads your eBook). Because digital advertising can be measured in so many different ways—how often an ad appears, is clicked, leads to a sale, and more—pricing can be tailored to the intended function of the ad.
Targeting for digital ads
As mentioned above, digital advertising is much more precise than more traditional forms of advertising. There are a variety of ways that ads are matched with audiences, depending on the type of ad. Search ads are targeted to specific search terms. Ads can also be matched based on shopping signals, such as audiences who have purchased products related to yours, or indicated interest in the type of product you sell.
The result of this robust matching ability is that audiences can see ads that are more likely to be relevant for them. Reaching relevant audiences boosts the success of your digital ads, and keeps you from spending your budget on serving ads to audiences who wouldn't be interested in your product or service.