Table of Contents
Digital ads, the bane of modern human existence? Or necessary evil?
Remind me why we need ads?
How do digital ads work, and who are the companies dominating the field?
The DSP and SSP layers of the digital ad sandwich
The rise of DSP and SSP specialists
The ad exchange in the middle of the digital ad sandwich
What’s the connection to chip stocks?
Digital Ads Industry 2025 – A Framework For Judging The Trade Desk, Netflix, AppLovin, Other Top Stocks
Speaking of digital ads, here’s a couple more Visual Capitalist infographics to help you understand how we got to where we are today. These aren’t an ad placement, we just like them and are re-sharing them with you. We aspire to make infographics like this when we grow up.
The first infographic is a history (going back over 1,000 years!) of media and information. 3
https://www.visualcapitalist.com/evolution-of-media-data-future/
And second, a more recent history showing the peak and gradual decline of most “legacy media” (but not all, one exception being outdoor media like billboards and such) over the last 20 years. Global advertising overall (traditional + digital) is still a growth industry, more on that momentarily. So what’s eating these declines in areas like TV (non-internet delivered), newspapers, and magazines? The digital ad-supported internet. 4
https://www.visualcapitalist.com/evolution-global-advertising-spend-1980-2020/
And a bonus infographic from Statista, showing the average amount of time Americans spend interacting with digital vs. traditional media. Here’s the link: https://www.statista.com/statistics/565628/time-spent-digital-traditional-media-usa/
Digital ads, the bane of modern human existence? Or necessary evil?
Last July, we made an IT flow chart and discussed the gradual buildout of global digital infrastructure. Here’s the link to the manual, and the timeline showing the messy development of today’s IT and internet backbone. (The reason for the out-of-chronological-order timeline is explained in the manual.) https://discord.com/channels/1113772894464528484/1260693273891045566/1260693273891045566
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Starting in the early 1990s, the quick commercialization of the internet was funded largely by businesses and their partners that saw early value in sharing data across their siloed sites. Future promises of massive business growth and profit led to business and government subsidization of big transcontinental data cables, local internet cable to homes and offices (originally traveling on legacy telecom infrastructure), and localized servers (data centers). Many early consumer adopters self-funded their internet presence by hosting a server at home, for simple things like running a blog or informational website.
But as the 1990s progressed, for an increasingly complex set of data and services to be created and shared, a new revenue stream needed to be generated. Why? Financial challenges were quickly arising by asking businesses and households to pay for basic equipment and ongoing subscription via an ISP (like AOL). CDNs (content delivery networks) managing the infrastructure and flow of data needed to be paid. The ISPs needed to be paid. Businesses making these investments needed to be paid. Internet access subscriptions weren’t cutting it. The proliferation of data on the internet needed a different monetization vertical.
Fun fact, after the dot-com bubble popped, a lot of this digital infrastructure was bought up by what we know today as the “tech giants” for pennies on the dollar – which is why a lot of these companies (like Google) have CDN infrastructure buried deep and hiding amidst their sprawling operations.
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