What Are Display Ads and How Do They Work?
Display ads are one of the most common and effective ways to advertise online. Whether you're browsing your favorite websites, scrolling through social media, or using mobile apps, you've probably encountered these ads.
But what exactly are display ads, how do they work, and why are they such an important part of digital marketing?
This guide will walk you through everything you need to know about display ads, from their definition to how they function, to tips on how to use them effectively.
In today’s digital age, advertising is everywhere. Traditional ads like TV commercials and billboards have been joined by a wide range of online advertisements. One of the most popular forms of online advertising is display ads.

Display ads are visual advertisements shown on websites, apps, and social media platforms. These ads can be in the form of banners, images, videos, and even interactive media that appear while users browse online.
But why are display ads so important? The answer is simple: they help businesses reach their target audience where they spend the most time – online. With millions of websites and apps in use worldwide, display ads offer a wide range of opportunities to get in front of potential customers.
In this guide, we’ll explain what display ads are, how they work, the benefits and challenges they present, and provide tips for using them effectively.
What Are Display Ads?
Display ads are graphic-based advertisements that appear on various websites, apps, and social media platforms. These ads are created to capture attention with visual elements such as images, text, colors, and sometimes video. Display ads are designed to generate brand awareness, drive traffic to websites, or even encourage sales and conversions.
Types of Display Ads
Display ads come in several different formats, each with its own purpose. Here are the most common types:
Banner Ads: These are typically rectangular ads that appear at the top, bottom, or sides of a webpage. Banner ads often feature images, text, or both. Their goal is to catch the attention of users as they browse the web.
Pop-up Ads: These ads appear suddenly over the content of a website when a user visits a page. While effective in getting attention, they can sometimes annoy users if overused.
Video Ads: These are ads that play as part of the content on a website or in a video on social media platforms. Video ads are increasingly popular because they engage users with dynamic content.
Native Ads: Native display ads blend in with the content of the website or app where they appear. These ads look like part of the page, making them less intrusive but still effective.
Rich Media Ads: These ads contain interactive elements, such as videos, animations, or clickable elements. Rich media ads are great for engaging users and encouraging them to interact with the ad.
The Mechanics of Display Ads
Now that we’ve covered what display ads are, let’s dive deeper into how they actually work. Understanding the mechanics behind display advertising will help you create more effective campaigns and get the best results.
1. Ad NetworksAn ad network is a platform that connects advertisers with websites (or publishers) where their ads will be displayed. Some well-known ad networks include:
Google Display Network (GDN): One of the largest and most popular ad networks, GDN allows advertisers to place ads on millions of websites that are part of Google's network. It offers a wide range of targeting options to help advertisers reach the right audience.
Programmatic Advertising: This is the process of buying and placing display ads through automated technology. Programmatic advertising uses algorithms to make decisions about which ads to show to which audience, and at what price. It's a more efficient way to place ads, especially for large campaigns.
Direct Ad Sales: This is when advertisers work directly with publishers (the website owners) to place ads. Direct ad sales allow advertisers to negotiate terms and pricing but may require more time and effort compared to using an ad network.

One of the key advantages of display advertising is its ability to target specific audiences. There are different types of targeting that advertisers can use to reach the right people with their ads:
Contextual Targeting: This type of targeting places ads based on the content of the page. For example, if you visit a website about fitness, you might see ads for workout gear or healthy meals. Contextual targeting helps ensure that the ads are relevant to the content the user is consuming.
Behavioral Targeting: This form of targeting uses the behavior of users to determine what ads to show. For instance, if a person has been browsing for new shoes online, they might start seeing shoe-related ads on other websites they visit. This is often called retargeting, and it helps remind users of products they’ve already shown interest in.
Geographic & Demographic Targeting: Ads can also be targeted based on a user's location (city, country, region) or their demographic data (age, gender, income level). For example, a local coffee shop may want to target people within a certain radius of its location.
Interest-Based Targeting: This type of targeting uses data on a user’s interests to show them ads related to their hobbies or lifestyle. For example, someone interested in travel might see ads for vacation destinations or travel accessories.
When it comes to placing display ads, advertisers often participate in an auction system. Here’s how it works:
Ad Placement: Once an advertiser sets up their campaign, they choose the types of websites, apps, or social media platforms where they want their ads to appear. The ad network then matches their ads with the right locations based on targeting options.
Bidding: Advertisers generally use a bidding system to buy ad space. There are two main pricing models:
Cost-Per-Click (CPC): Advertisers pay each time someone clicks on their ad. This model works well for driving traffic to a website.
Cost-Per-Impression (CPM): Advertisers pay based on how many times their ad is shown (impressions). This is ideal for brand awareness campaigns.
How Display Ads Work
Now that you understand the basics of display ads, let’s break down the actual process of how they are created, delivered, and measured.
1. Ad CreationCreating an effective display ad requires a combination of design and copywriting skills. Here’s how to make sure your display ad is well-crafted:
Design: The design of the ad should be eye-catching but not too busy. Use high-quality images, bold colors, and simple, easy-to-read text. Remember that people’s attention spans are short, so you need to grab their attention quickly.
Copywriting: The copy in your ad should be short and to the point. Focus on a clear call to action (CTA) that tells the viewer what you want them to do. For example, "Shop Now," "Learn More," or "Get Your Free Trial."
Mobile Optimization: Since many users access websites on mobile devices, make sure your display ad is optimized for different screen sizes. This includes making the text readable and the buttons easy to click on smaller screens.
Once your ad is ready, it needs to be delivered to users. This is where ad networks come in. When a user visits a website or app that is part of the ad network, the network’s algorithm determines which ad to display based on the targeting settings you’ve chosen.
If you’re using a programmatic ad network, this process happens in real-time through an auction system. Advertisers bid for ad placements, and the highest bidder gets their ad shown. This happens in a fraction of a second as the page loads.
3. Tracking & AnalyticsAfter your ads are displayed, it’s important to track their performance. Most ad networks offer detailed analytics to help you measure the effectiveness of your ads. Some key metrics to track include:
Impressions: The number of times your ad was shown to users.
Click-Through Rate (CTR): The percentage of people who clicked on your ad after seeing it.
Conversion Rate: The percentage of users who took the desired action after clicking on your ad, such as making a purchase or filling out a form.
Cost per Conversion: The amount you spent on ads to get a conversion.
Benefits of Display Ads
Display ads offer a number of advantages for businesses looking to advertise online. Here are some key benefits:
1. Brand VisibilityDisplay ads help increase your brand’s visibility by getting your logo and messaging in front of a large audience. Even if users don’t click on the ad, seeing your brand repeatedly can increase brand recall.
2. Lead GenerationDisplay ads are also an effective way to generate leads. By targeting the right audience and using compelling calls to action, you can direct users to landing pages where they can sign up for newsletters, get free trials, or make a purchase.
3. Cost-EffectiveCompared to traditional advertising, display ads are often more affordable. With the ability to control your ad spend, you can start small and scale up as you see results. Additionally, many ad networks offer flexible pricing models, allowing you to choose the one that best fits your goals.
4. Creative FlexibilityDisplay ads come in a variety of formats, giving you the freedom to get creative. Whether you use static images, videos, or interactive elements, you can experiment with different ad styles to find what works best for your audience.
5. EngagementWhen done well, display ads can engage users in ways that other types of ads can’t. Interactive elements like quizzes, polls, and videos invite users to engage directly with the ad, which can lead to higher conversion rates.
Challenges of Display Ads
While display ads have many benefits, they also come with some challenges:
1. Banner BlindnessMany users have become so accustomed to seeing display ads that they no longer notice them. This phenomenon is called banner blindness. To overcome this, advertisers need to get creative with their ad designs and targeting.
2. Ad FatigueIf users see the same ads too many times, they may become tired of them, which leads to ad fatigue. To avoid this, you can refresh your ads regularly or use frequency capping to limit how often a user sees your ad.
3. Ad BlockingMore and more users are using ad blockers to avoid online ads. This can reduce the effectiveness of your display ad campaigns. To combat this, you can consider using less intrusive formats like native ads.
4. Complexity in TargetingWhile targeting can be highly effective, it can also be complex. With so many options available, it can be difficult to find the right balance between reaching the right audience and getting enough exposure.
Best Practices for Display Advertising
To get the most out of your display ads, follow these best practices:
Design Eye-Catching Ads: Keep your designs simple, clear, and mobile-friendly. Make sure the call-to-action is visible and easy to understand.
Target the Right Audience: Use segmentation and targeting options to make sure your ads reach the most relevant users.
Test Your Ads: Run A/B tests to see which ad formats, designs, and messaging resonate best with your audience.
Set Frequency Caps: Limit how often your ads are shown to the same user to avoid ad fatigue.
Conclusion
Display ads are a powerful tool for reaching potential customers online. By understanding how they work, the benefits they offer, and the challenges they present, you can create effective display advertising campaigns that deliver results.
Whether you’re looking to build brand awareness, drive traffic, or generate leads, display ads are an essential part of any digital marketing strategy.