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how does an ad network work

I am going to explain this to you assuming that you already know what an ad network is.

Every ad network will have two platforms - advertisers & publishers.

Advertisers are those that sell ads and publishers are those that get money displaying those ads. For eg: Adwords is for advertisers and Adsense (dfp) is for publishers.

The ad network plays the role of a market place. They do checks on the quality, relevance and legal genuineness of the ad. They guide the advertiser on the bid he can charge.

The publisher picks the ad from the networks inventory. His decision may be based on his geo, the service/business or broadly just on pricing. The publisher can be anybody who has signed up in the publisher network. In Google ad network it’s Adsense. FB now has only advertiser platform and they use FB itself as the publishing platform.

The advertiser sells the ad to the network for a specific bid or sometimes without a bid. Those ads are added to the ad exchange. Some ad networks sell this unsold ads to partner networks.

Then there is pricing models like CPC, CPM and CPA. Advertisers decide on which pricing models they want there ads to be charged. So those ads will be available only to publishers with those that agree to that pricing criteria.