An Overview of Online Advertising and the Fundamentals of Computational Advertising

The author, who frequently tests advertising-related business, recently read the book Computational Advertising: Internet Business Monetization Market and Technology and shares insights on the development history and basic concepts of online advertising.

1. Online Advertising Overview

Online advertising, also called internet or web advertising, refers to ads placed on online media targeting audiences with product‑oriented, technology‑driven delivery.

Advertising is a paid, organized, persuasive communication activity conducted by a sponsor through various media to promote products, services, or ideas. The main participants are the demand side (advertisers or their agencies), the supply side (publishers or monetization platforms), and the audience.

Creative formats are diverse, including banner ads, text‑link ads, rich‑media ads, video ads, social ads, mobile ads, and email‑targeted ads. Examples of banner and text‑link ads are shown below:

Initially, ads were sold via contracts that granted exclusive placement for a fixed period. As targeting improved and advertisers grew, contract sales gave way to the dominant model of bidding ads, where supply guarantees quality (cost per impression) but not quantity.

Key terms related to bidding ads include:

DSP (Demand‑Side Platform): a platform for advertisers to set targeting, geography, bids, etc.

ADX (Ad Exchange): an open marketplace connecting publishers and advertisers, assigning value to each impression via real‑time bidding.

ADN (Ad Network): a system linking advertisers with web media, providing ad management, delivery, and monitoring.

RTB (Real‑Time Bidding): advertisers bid in real time for each impression based on their audience definition.

2. Fundamentals of Computational Advertising

The effectiveness principle of computational advertising is illustrated in the diagram below:

The core issue is revenue, and supply‑side billing methods include:

CPC (Cost‑Per‑Click): charge per ad click.

CPM (Cost‑Per‑Mille): charge per thousand impressions.

CPS: charge based on sales orders, conversions, or ROI.

CPT: charge for exclusive time‑slot placement (a sales model rather than a billing model).

ROI (Return on Investment): revenue generated by the ad divided by spend, commonly used in e‑commerce and gaming.

Applying these fundamentals to testing, the author focuses on mobile ad SDK testing, covering:

Polling request intervals.

Post‑click behavior (in‑app, external, download, deep link).

Different ad sizes.

Portrait/landscape switching.

SDK callbacks after integration.

For video ads (native, splash, rewarded), SDK player testing includes:

Orientation switching during playback.

Detecting black or white screens.

Default sound state.

Handling multiple ad requests.

Pause, early exit, and post‑playback behavior.

Billing methods impose strict reporting requirements (tracking points). For CPC, every click must be reported with all fields; for CPM, each impression (first and subsequent) must be reported. Missed reporting can affect revenue and have wide impact.

The next article will discuss online ad product logic; stay tuned.

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