How it works
The app integrates one mediation SDK together with adapters for each ad network it wants to sell to. When an ad slot is about to be shown, the mediation layer picks the source in one of two ways. In a waterfall, networks are called one after another in an order based on what they paid in the past. With in-app bidding, networks bid at the same moment and the highest bid wins. Many setups combine the two. The mediation SDK also reports what each impression earned, which is the input for ad revenue attribution.
Why it matters for an app team
Depending on one network leaves money on the table and slots unfilled. Mediation raises the price through competition and gives one place to manage placements, price floors and reporting. For the user acquisition team it is the source of revenue data for ad-funded apps.
In practice
Example with made-up numbers: an app shows 1,000,000 interstitial ads a month. Through one network it earns an average of $8 per thousand impressions, or $8,000. With several networks competing through mediation the average is $10, or $10,000, for the same traffic.
Common confusion
Mediation is about selling ad space in your app, which is monetisation. An MMP measures where your users came from, which is acquisition. They are different products that exchange data: the mediation side supplies revenue and the measurement side supplies the install source.