Understanding
Online Advertising

How Does It Work?

With Interest-Based Advertising, NAI member companies help advertisers show relevant ads -- matching these ads with broad interest categories or groups like "male clothing shoppers 25-34" or "car buyers in Illinois."

NAI members distinguish between visitors to a site, assigning them to broad interest category groups using information such as the types of websites or pages visited. For NAI members, Interest-Based Advertising is not about you as an identifiable individual. Instead, NAI member companies make educated guesses about the preferences and interests of randomly identified website visitors like you.

How do I get placed in interest categories and groups?

The basic way you are placed into an interest category or group is based on your visits to websites. Let’s say an NAI member company partnered with a clothing retail website that you visit. That NAI member would assign an ID to your browser usually done by storing a random, unique ID number in a text file or cookie on your computer. This is then matched to a “clothing shopper” category by pairing that ID number with interest categories/groups in an online database.

Unique ID Number         Matched Categories         
450982374 "M","25-34","clothing"

Other information can be used to match you into a group, as well. For example, if you have previously purchased oxford shirts from that retail website, the website could tell the NAI company to also match “oxford shirt buyer” to the ID.

How do ads know what city I am in?

Do you ever see an ad that’s specific to the city you are in? NAI members sometimes use an approximation of your location to make sure they won’t serve ads for snow shovels in Florida or for Boston Red Sox tickets in New York.

So how do advertisers customize ads based on your city or region? There are numbers called IP addresses that are assigned to computers on the Internet. You may have seen them before, they look like this: 198.101.218.235. An IP address is how computers are able to identify each other and know where to send information over the Internet.

An IP address is just that, an address. However, it is not an exact physical address. IP addresses can be associated with general geographic areas and that is how NAI members use this information to show ads customized for particular cities or other regions.

How do ads know what I am shopping for?

Is there a pair of shoes popping up as you surf the Internet? A piece of furniture you’re seeing advertised on several different websites you’ve been reading? How does this happen? The process is essentially the same as getting placed in any interest category, as described above. Except, instead of a broad interest category, it is an interest in a specific product like “Brown Pants” or “Green Dress.”

Let’s say you shop for a pair of shoes. The website where you shopped can tell the NAI member it works with to assign a random ID and associate that ID with that particular brand and style of shoes. Now, that retailer will know to advertise the exact pair of shoes to you. This process does not require retailers to know anything about you as an individual, only that someone using your computer showed interest in their products.

Other things to know:

Who are the players in Interest-Based Advertising?

You:

The consumer

Publisher:

The individual or business in charge of the website you are visiting. They sell advertising space on their websites to advertisers. 

Advertiser:

The individual or business that has a product or service they want to advertise. They buy advertising space on websites. 

Third-Party Advertising Company:

The sites you visit usually do not play a direct role in choosing the ads you see. Instead, a third-party advertising company manages the ad selection and placement for both the publisher and advertiser. It makes the process more efficient for everyone.

NAI members are companies who are committed to empowering individuals to make informed decisions about their advertising choices. NAI members include advertising networks and other third-party online companies who help create, deliver, and manage the ads you see. These companies are all committed to responsible practices. Read more about our members.

How does it benefit me?

Interest-Based Advertising also plays an integral role in driving economic growth and encouraging competition among companies. Interest-Based Advertising affords small businesses and startups the ability to create new tools and services.

So, why is relevant advertising important to you and to advertisers? By keeping ads relevant to you – advertisers aren’t wasting your time with intrusive and annoying ads while also ensuring they are not wasting money on trying to reach the wrong audience.     MORE ›