To fully comprehend the industry's intricate workings, a clear understanding of the Digital Advertising Market Segmentation is essential, as it breaks down the vast market into distinct categories based on format, platform, and pricing model. The most common and fundamental segmentation is by advertising format, which details the specific type of creative that is delivered to the user. This includes Search Advertising, which consists of text-based ads displayed on search engine results pages; Social Media Advertising, which encompasses a wide variety of formats (image, video, carousel, stories) delivered within the feeds of social networks; Video Advertising, which includes pre-roll, mid-roll, and out-stream ads on platforms like YouTube and CTV; and Display Advertising, the banner and rich media ads found on websites and apps across the internet. Each of these formats serves a different marketing objective, from driving direct response (Search) to building brand awareness (Video), and commands a different share of the overall market spend.

Another critical method of segmentation is by the device or platform on which the ads are delivered. The market is primarily divided into two major platform segments: Mobile and Desktop. Mobile advertising is currently the dominant segment, accounting for the majority of global digital ad spend, a direct reflection of the fact that consumers now spend more time on their smartphones than on any other device. This segment is characterized by app-based environments and formats optimized for smaller screens and touch interfaces. The Desktop segment, while smaller and growing more slowly, remains highly important, particularly for B2B advertising and for high-consideration purchases where consumers are more likely to conduct detailed research on a larger screen. A rapidly emerging third platform segment is Connected TV (CTV) and Over-the-Top (OTT) devices, which represents the delivery of digital ads to smart TVs and streaming devices, a category that is rapidly gaining importance as it captures traditional television budgets.

Finally, the market is often segmented by the pricing model used to buy and sell the advertising inventory, which defines how advertisers pay for their campaigns. The most common models are Cost-Per-Click (CPC) or Pay-Per-Click (PPC), where the advertiser pays each time a user clicks on their ad, a model that is dominant in search advertising and heavily focused on driving direct traffic. Another major model is Cost-Per-Mille (CPM), also known as Cost-Per-Thousand-Impressions, where the advertiser pays a flat rate for every thousand times their ad is displayed, a model typically used for brand awareness campaigns where the primary goal is reach and visibility. Other models include Cost-Per-Action (CPA) or Cost-Per-Acquisition, where the advertiser only pays when a specific conversion event (like a sale or a lead form submission) occurs, and Cost-Per-View (CPV) for video ads. This segmentation by pricing model is crucial as it directly aligns with the advertiser's campaign goals and risk tolerance.