How ad-tech companies make money

Ad-tech, short for advertising technology, is the set of tools that buys, sells and delivers online ads. An advertiser says who it wants to reach and how much it will pay. A publisher, such as a news app, a game or a website, has screen space to sell. Ad-tech companies sit between them and match the two within milliseconds.

Without ad-tech, every advertiser would need to negotiate with every app. With it, a single dashboard can buy space across thousands of apps. A live case: Affle, which runs a mobile advertising and consumer intelligence platform, agreed to buy North American ad-tech firm Perion Network in an all-cash deal, according to its recent story.

The advertiser pays for the campaign, and a publisher owns the space. A demand-side platform helps advertisers buy ads. A supply-side platform helps publishers sell them. An ad exchange runs the auction between the two. Measurement firms check whether an ad was seen and whether it led to an action, and fraud detection firms look for fake clicks.

Some companies do several of these. Mobile app marketing firms, for example, help an app find new users and charge for each install. Others are agencies that buy ads in bulk and resell them with a markup. Knowing which role a company plays tells you how it earns.

• Advertiser: pays to reach people.
• Publisher: an app or website that sells ad space.
• Demand-side platform (DSP): software used by advertisers to buy.
• Supply-side platform (SSP): software used by publishers to sell.
• Ad exchange: the marketplace where bids are matched.
• Measurement and fraud tools: verify views and clicks.

There are three common ways. The first is a spread: the company charges the advertiser a price, pays the publisher a lower price and keeps the difference. The second is a platform fee, usually a percentage of the money passing through the software. The third is a managed service, where the company runs campaigns for the advertiser for a fee.

Pricing models follow the action being bought. The terms below use made-up values for illustration. A company that is paid per install earns only if the user installs the app, so it must send real, active users to earn.

The share the company keeps is called its take rate. A take rate of 20 per cent means ₹20 of every ₹100 spent by advertisers is the company's. Whether the company reports the full ₹100 or only the ₹20 as revenue depends on whether it acts as a principal or as an agent in the deal, so the headline revenue can be hard to compare across companies.

A further source of income is data and measurement. Some firms charge for audience reports, attribution tools that show which ad led to a purchase, and software for brands to run their own campaigns. These are usually sold as a subscription, which gives steadier revenue than a spread that moves with the ad budgets of customers.

• CPM (cost per thousand views): ₹120 for every thousand times an ad is shown.
• CPC (cost per click): ₹5 each time someone clicks.
• CPI (cost per install): ₹60 each time a user installs an app.
• CPA (cost per action): a price for a sale, sign-up or other chosen action.

Programmatic advertising means ads are bought and sold by software in an automatic auction instead of by phone calls and contracts. When a person opens an app, the app tells an exchange that an ad slot is free. Advertisers' software bids in a fraction of a second based on what they know about the person and the context. The highest bid wins, and the ad is shown.

This is efficient, but it depends on data. The more an ad-tech company knows about a user's interests and behaviour, the better it can target. That dependence on data brings in privacy law.

The Digital Personal Data Protection (DPDP) Act 2023 governs how personal data is used. The DPDP Rules were notified on 13 November 2025 and come into force in phases over about 18 months, so most duties apply from around May 2027. They require a clear notice and consent for processing personal data. The Act also bars tracking, behavioural monitoring and targeted advertising aimed at children, and sets stricter handling for children's data. Exact phase dates should be checked.

The Information Technology Act 2000 still applies to content and security. On tax, the 6 per cent equalisation levy that applied to payments for online advertising to non-resident firms was abolished for consideration received on or after 1 April 2025. A general rule is that ad-tech firms must be ready to show where their data came from and that users agreed. This is general information, and a professional should be consulted for a specific case.

Ad fraud is the biggest operating risk. Fake clicks and installs generated by bots waste advertisers' money, and advertisers stop buying from firms that cannot filter them. Large technology companies also control how apps and browsers track users, so a change in their rules can cut a smaller ad-tech firm's targeting overnight.

Demand is cyclical. Advertisers cut budgets quickly when sales slow, which makes quarterly revenue uneven. Revenue also depends on a few large customers in some cases, so the loss of one can matter.

There is also a trust risk. Advertisers want to know where their ads ran. If an ad appears beside harmful content, brands pull spending, so ad-tech firms invest in brand safety checks. These checks cost money, but they protect the relationship with large customers.

Check whether revenue is gross, meaning all money from advertisers, or net, meaning only the company's share. A company with a 20 per cent take rate and ₹1,000 crore of ad spend can report either ₹1,000 crore or ₹200 crore. Check the share of revenue from India versus other markets, and the growth rate of the core business apart from acquisitions.

For an acquisition, look at the payment form, whether cash or shares, the price per share and the reason given, such as new markets or new technology. A deal price is not a measure of performance. This is general information and not investment advice.