Third-party ad serving refers to a common online scenario in which a website operator or publisher presents content for users and the site also includes advertising delivered by another provider. This is a relatively common approach websites use to earn advertising revenue, and it also offers a way for small businesses to market to targeted consumers. However, privacy issues are a concern for consumers.

The Parties
The process known as third-party advertising often has four parties involved. The original two parties in the online marketplace are the published websites and the online users that visit them. Typically, websites involved in third-party advertising are content, media or social media sites that earn money through advertising. The technical third-party is the advertiser that wants to place on ad on the website to reach its audience. However, many advertisers don’t have the tools to serve their own ads, or the publishers prefer not to sell ads directly to advertisers. This has opened the door for a massive market of third-party ad servers.

Ad Server Role
The ad server is essentially the intermediary that brings together consumers, websites and advertisers. Google is by far the largest third-party ad server with its AdWords and AdSense platforms, and there is a huge number of other small-to-medium providers. The ad server seeks website operators that want to place advertising on their sites. The operators place code or script that allows the server’s network to appear in the ad space. The server also recruits advertisers that want to place ads on the available network of sites. The advertiser buys a certain amount of ad buys or spaces and takes a cut of the revenue before passing it on to the website operator.

Small Business and Cookies
Typically, companies bid a certain amount per click-through on ads and budget a total dollar amount. This affects the number of times its ad is served in rotation with other ads on the website. To enhance the value to all parties, third-party servers normally use an Internet technology known as cookies. This allows the server to gather basic data on the visitor to the website. Over time, the server tracks a user’s online activity and learns his location, age, marital and parental status and other demographic details. This enables the server to target specific users with more focused ads from businesses that are nearby or that relate to the user’s interests. This benefits companies that buy ads because their money is used to target more likely buyers.

Privacy Concerns
A major roadblock to the evolution of third-party advertising is consumer concerns about privacy. The notion that ad servers can so easily gather basic data about people online is unnerving for some people. Many third-party servers require website operators using their servers to publish a disclosure telling site users that the website uses a third-party server that collects user data for research. These privacy disclosures often are tucked away on help pages.