The AI-Powered Evolution of Ad Tech in 2021 (Part I)

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Last updated on March 7th, 2022

The ad tech industry has been rapidly revolutionizing the way consumers and businesses interact with each other online. In 2019, the U.S. ad tech industry was worth $60 billion based on programmatic display advertising alone. This number is expected to jump to $81 billion in 2021 – that’s a 35% increase in just 24 months!

The reason behind this staggering growth is an open secret; increasing consumer demand coupled with sophistication in ad tech tools and techniques. Processes that used to take days or even weeks, now occur in milliseconds thanks to ad servers, SSPs and DSPs. The latest and most essential factor behind this ad tech success is one that has had an immense impact on modern ICT and digital technologies: artificial intelligence.

The following 2-part blog explores the evolution of ad tech in the modern age, catalyzed by the integration of artificial intelligence technologies. Let us first visit the beginnings of ad tech and its inherent connection with marketing technology (MarTech) in Part I of the blog. This part also discusses the modern structure of ad tech to appreciate the impact AI has had on the industry.

Part II of the blog discuss advancements in core technologies from Robotic Process Automation (RPA) to Intelligent Process Automation (IPA) and how publishers and advertisers are contending with the change in the ad tech industry based on modern trends in 2021.

A Brief History of Ad Tech

Let’s take a look at how the Ad tech industry was born and how we got to where we stand today.

The Early Days

It’s easy to assume that ad tech is an invention of the 21st century but in truth, the roots of the industry were planted in the mid-1990s. The genesis of ad tech can be tracked to the banner ads first placed on websites in 1993-1994 (exact date is unconfirmed). AT&T holds the honor of placing the first banner ad on that had a scarcely believable clickthrough rate of 44%!

Of course, no mention of ad tech pioneers can be complete without including the name of a Silicon Valley law firm Heller, Ehram, White and McAuliffe who was sold a clickable ad by Global Network Navigator (GNN) around the same time when placed AT&T banner ad on its website.

FocaLink Media Services contributed significantly to the evolution of the ad tech industry by the introduction of the first-ever ad server in 1995. This ad server is still regarded as the first piece of advertising technology that improved the management and delivery of online ads. 

Yet the introduction of the first ad server did not solve coordination issues between advertisers and publishers that led to oversupply problems and inefficiencies in insertion orders. To solve this problem, a company known as DoubleClick emerged as the first-ever ad network in 1996. This ad network allowed publishers and advertisers to coordinate and fulfill demand without the need for in-house advertising operation teams. Doubleclick was later acquired by none other than Google in March 2008 for $3.1 billion!

The Evolution Era

Around the same time as DoubleClick’s revolutionary contribution to the ad tech industry, another salient milestone was being achieved elsewhere. Yahoo search engine was booming in 1996 and the company took the step to start search ads in the same year. When Google launched in 1998, the search engine soon took the same route as Yahoo and started search ads for users. 

At the stroke of the 21st century in the year 2000, Google introduced AdWords (now rebranded as Google Ads). AdWords allowed advertisers to bid for ad inventory using a cost per click model (CPC) initiated in 2002. With so many ads running simultaneously all across the internet, users started to feel overwhelmed. As such, a countermeasure was developed in the form of AdBlock Plus in 2006, which was the first ad-blocking software and a significant milestone in the ad tech industry.

2007 was also a big year for ad tech, mostly because of the introduction of mobile ad networks in the wake of Apple Inc. launching the world’s first mass produced smartphone, the iPhone. The mobile ad networks did for mobile phones, what ad networks did for websites – buy and sell ad space.

In 2008, the ad tech industry saw the invention of the Demand Side Platforms (DSPs) that allow advertisers to buy ad space from publishers in a matter of seconds. Today, Google Marketing Platform’s Display and Video 360 (DV360) serves as the world’s most commonly used DSP.

history of ad tech

The Modern Structure of Ad Tech

With the ad tech industry going through so many changes since its inception, it’s essential marketers starting out in paid marketing understand how ad tech works in 2021. This section provides a brief overview of the structure of the ad tech process while outlining its efficiencies and deficiencies. 

In order to understand how ad tech works today, there are a couple of terms that need to be mentioned.

Ad Inventory

Ad inventory is simply the ad space that is available for sale on publishers’ online spaces. A common example of online ad spaces are web pages on websites.

Ad Server

Ad servers are ad tech technologies that manage and show relevant ads to visitors who visit publishers’ websites. Once a visitor lands on the page, the publisher’s ad server (also known as 1st party ad servers) sends an ad creative request to the advertiser’s ad server (known as 3rd party ad servers) to fill the standardized ad spaces on the page with a relevant ad. This makes the process of filling ad spaces more efficient and data regarding ad performance easier to collect.

Ad Network

An ad network accumulates unsold ad inventory from publishers and sells it to advertisers according to their demand. An ad network is usually an organization that earns revenue by taking a percentage of the ad revenue generated from the ad inventory sold to advertisers. 

Ad Exchange

An ad exchange is an online marketplace where advertisers can get into direct contact with publishers for relevant ad inventory. Unlike an ad network, an ad exchange is not an organization that acts as a middleman between publishers and advertisers. Rather, it is like a marketplace where any advertiser can approach publishers directly according to the target audience that each publisher website attracts.

Demand Side Platform (DSP)

A demand side platform (DSP) is an automated platform through which advertisers can engage with multiple ad exchanges and optimize ad campaigns. The basic function of a DSP is to allow ad buyers to bid for impressions on publishers’ ad space and inventory while a visitor is on the website. This is known as Real Time Bidding (RTB) as it allows advertisers to bid while the visitor is on the site.

Supply Side Platform (SSP)

A supply side platform (SSP) does for publishers what a DSP does for advertisers. It allows publishers to manage ad inventory and offer it for sale to a maximum number of advertisers so that it can be sold for the highest bid. SSP also offers publishers advanced analytics capabilities that let them know what ad inventory works best for their particular set of advertisers.

How It All Works?

Here’s how each of the components of the ad tech framework comes together to accomplish the programmatic advertising process in the modern age. Please note that the process described below is specific for a desktop visitor and varies for mobile environments.

  1. A user lands on a publishers’ website. This user is interested in the content on the website which defines a particular interest for the user. As such, the publisher offers ad space for advertisers who are interested in targeting this sort of user.
  2. The user’s browser opens up a connection with the publisher’s ad server (1st party server). The 1st party ad server assembles content for the page in the form of HTML code and sends it back to the browser, which then interprets and renders the code onto the webpage.
  3. The HTML code sent by the ad server has lines that tell the browser to display ad spaces on the webpage and where to go to find content for the ad that will fill those spaces. The browser redirects to a relevant agency ad server, according to the information provided by SSP in step 8.
  4. Meanwhile, the publisher’s ad server also collects information about the user to build a customer profile. The server then puts out the opportunity to advertise to this customer via the supply side platform (SSP).
  5. The SSP sends an ad request to the ad exchange, that connects to hundreds and thousands of different ad networks, DSPs and other ad exchanges. 
  6. DSPs are programmed to bid for the ad impression put up by the SSP if it falls under the criteria set by the advertisers. For example, the advertiser might tell the DSP to bid on an ad impression if it costs less than or equal to $0.05. Multiple advertisers bid simultaneously for the opportunity to show ads for the desired customer profile. This is known as Real Time Bidding (RTB).
  7. Once the ad exchange selects a winning bid based on RTB, the winning DSP provides information about the ad creative to the ad exchange. This information is already made available for the DSP by the ad agency that creates the ad.
  8. The ad exchange transfers the information about the ad creative to the SSP. The SSP relays this information to the publisher’s ad server and the ad server provides this information to the browser in the HTML code mentioned in step 2.
  9. The browser then redirects to the agency’s ad server (3rd party server) to retrieve the ad that is to be displayed on the webpage for the user. Once the information is retrieved, the ad is displayed. Each request from the browser to display the ad on the webpage is interpreted as an “impression” by the agency ad server.
  10. The agency ad server also connects with the publisher’s website and gathers data about the performance of the ad that was displayed to the user.
The Ad Tech Process

This entire process takes place in about 10 milliseconds. To put that into context, it takes humans 300 milliseconds to blink an eye!

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