Understanding
Online Advertising

How Does It Work?

With IBA/CAA, 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 and users of an app, assigning them to broad interest category groups using information such as the types of websites visited or the demographics of people who use a certain app. For NAI members, IBA/CAA is not about you as an identifiable individual. Instead, NAI member companies make educated guesses about the preferences and interests of consumers like you.

How do I get placed in interest categories and groups?

The basic way you are placed into an interest category or group on a browser 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 by storing a unique ID number in a text file or cookie on your browser. This is then matched to a “clothing shopper” category by pairing that ID number with interest categories/groups in an online database.

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.

On mobile apps, the process is similar but it uses a different set of technologies. The mobile operating system you use, like Android or iOS, is likely to provide an identifier specifically for advertisers to use. This Mobile Advertising Identifier functions similarly to a cookie. It enables advertisers to identify your behavior across apps, without needing to use a more permanent phone or tablet identifier. Most of these identifiers include privacy options that allow users to reset the assigned identifier or to opt-out of Cross-App Advertising.

To do Cross-App Advertising, the NAI member may work with an app so that it can send them information relevant to your preferences. For example, if you open an app to look for highly rated local seafood restaurants, that app may tell the NAI member that a user with your device identifier may be interested in seafood, and that the user is in downtown Manhattan. This information may be used to show ads for more local seafood places.

How do ads know where I am?

Do you ever see an ad that’s specific to the city you are in? NAI members may sometimes use your location to make sure they don’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? Historically, they used numbers called IP addresses, which are assigned to computers or devices on the Internet. You may have seen them before; they look like this: 198.101.218.235. An IP address is how computers and devices are able to identify each other and know where to send information over the Internet.

IP addresses can be associated with general geographic areas and that is how NAI members sometimes use this information to show ads customized to your region.

Browsers and mobile devices now also include numerous technologies to identify your location, including GPS (Global Positioning System), Wi-Fi triangulation, and iBeacons. These types of location tend to be more precise than location derived from IP Addresses. NAI members are required to obtain Opt-In Consent from you if they want to store your precise location for IBA/CAA purposes.

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.” We call this Retargeting, and all of NAI's requirements for Interest-Based Advertising and Cross-App Advertising also apply to this practice.

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 pseudonymous 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 browser showed interest in their products. Advertisers place bids to reach thousands or millions of people that are interested in shoes.

Other things to know:

Who are the players in IBA/CAA?

You:

The consumer

Publisher:

The individual or business in charge of a website or app. They sell advertising space on their websites and apps to advertisers. 

Advertiser:

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

Third-Party Advertising Company:

Websites and apps usually do not play a direct role in choosing the ads you see. Instead, a third-party advertising technology 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.