Behind the scenes: ad networks and ad exchanges, and how they work

I already have written about transparency, ad fraud and dodgy market members that might damage your ad campaign performance. But let’s take a closer look at the different market players and what are their roles on the market.

Back in the 90s when online advertising started to scale globally, publishers and advertisers were searching the ways to efficiently manage their buying and selling needs. Thus, they started to form the first ad networks. As more and more websites and apps launched there needed to be a way to connect millions of advertisers to the billions of publishers with unsold inventory – this led to the creation of ad exchanges.

Strictly speaking, both, ad network and ad exchange, have the same purpose. They aggregate publisher’s inventory on their platforms and offer them to advertisers. Both can be integrated with demand-side platforms (DSPs) and supply-side platforms (SSPs), enabling programmatic ad.

If you decided to move your mobile ad in-house it’s crucial to know where the ad inventory comes from and how to buy it. Let’s have a look at how exactly they work and what is the difference.

What is an Advertising Network?

An ad network is an online platform that allows publishers to sell their inventory to advertisers. It’s pretty much as a supermarket where shoppers can get all different kinds of goods from a single place.

Acting as an intermediary between advertisers and publishers, ad network sort inventory into categories to target specific audiences for different ad campaigns. These categories allow advertisers to target audience specifically by age, gender, location, etc.

What is an Advertising Exchange?

An ad exchange is an online marketplace where advertisers and publishers can buy and sell advertising space. It works a lot like buying and selling shares on the stock market. Ad exchanges often use real-time-bidding technology to run auctions. Auctions enable to sell ad inventory to the highest bidder based on impression-by-impression. This means that advertisers must bid against each other for any specific ad space.

For publishers, ad exchanges have become an essential way in which they can maximize the value of their remaining inventory, for advertisers ad exchanges have maximized the value of their ad spend and have revolutionized the way inventory can be fought based on who they’re targeted towards.

Where to buy: ad network or ad exchange?

Even though it might seem that ad networks and ad exchange platforms have many things in common there are not the same thing. Knowing their advantages and disadvantages might help you to understand what roles they play in the digital ad market. Let’s get into it.

First thing you should remember, the ad networks are often companies that can regulate their pricing to increase revenue when the ad exchanges are more of technologies for media buying and have a different business model.

The ad exchange offers an open pool of various inventory and acts as an open ad marketplace for all market players, including publishers, advertisers, agencies, ad networks, other ad exchanges, DSPs, SSPs,
agency trading desks (ADTs). So, taking advantage of this, ad networks often purchase good quality inventory on ad exchanges for reselling.

Transparency is not always the case with ad networks: Advertisers don’t know which websites serve their ads and publishers don’t know what companies buy their inventory. On the other hand, the initial idea of ad exchanges was to make the market more transparent. Bidding on ad exchanges advertisers know what publishers they buy inventory from and vice versa. Sometimes you can even track the pages on which ads were served, and even see competitors’ bids 😉

Speaking about the pricing: ad networks determine the inventory cost themselves and don’t share the initial prices with advertisers, whereas on ad exchanges the cost is based on the bids coming from advertisers during a real-time bidding auction. This leads to the fact that advertisers often overpay for the inventory on ad networks when on ad exchanges they can define prices themselves. The same applies to publishers, they have less control over inventory optimization and pricing on ad networks than on ad exchanges.

However, for small- and medium-sized buyers, who don’t have technologies to buy through ad exchanges, ad networks are the only way to get access to inventory. Unless you prefer to stay in the driver’s seat and manage your ad campaign, you might want to use a SaaS platform that will provide you the technology to enter ad exchanges, like Adello Direct.

I hope this can help you to gather a mobile ad market puzzle. Even though ad exchanges and ad networks have their benefits if you use DSPs or SaaS platforms for your mobile ad, like Adello Direct, you can take advantage of both, performing automated media buying. On Adello Direct dashboard you can set your budget, minimum bidding price, and KPI and based on your settings the platform will request multiple ad networks and ad exchanges to find the best inventory among all available offerings to achieve your campaign goal.

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