Ad Networks vs. Ad Exchanges

Reading time: 6 minutes

While ad networks and ad exchanges technically serve the same purpose for publishers, they differ in their setup and complexities of buying and selling ad inventories. 

For example, to get started with an ad network[5], all a publisher[15] has to do is sign up with Google AdSense[6] and adhere to its guidelines. Upon approval, publishers receive a script and are then asked to create ad units on certain pages — and that’s it (give or take).

While Google AdSense isn’t the only ad network publishers can sign up with, they all work similarly in set-up and monetization steps. 

Ad exchanges, on the other hand, work completely differently from ad networks. There are a lot of technical configurations to take care of and other things you must do for approval. Of course, you can always avoid most of the frustration by partnering up with a server-side platform (SSP[1]), but that’s a topic for another day.

If the above examples seem oversimplified, it’s because they are. Read on to learn more about what separates ad networks and ad exchanges in both concept and action in greater detail.

What Is an Ad Network?

An ad network (an advertising buying network) is an online platform used by publishers and advertisements for the buying and selling of ad inventory[16][7]. The platform itself acts as the intermediary between the two parties by gathering a publisher’s inventory and matching it with the demand coming from the advertisers. 

The beauty of ad networks is that they’re able to sort through the publisher’s inventory and divide it up into categories according to specific audience segments. It also bundles remnant[17] inventories to help publishers maximize their gains using the ads they’re having difficulty selling off. 

How Do Ad Networks Work?

Ad networks work by collecting a pool of inventories from the various publishers from all over the world participating within a specific network. From there, it bundles those inventories based on criteria such as verticals, demographics, context, and so on. Ad networks also provide advertisers with the option to choose their preferences for the same criteria to run the display ads[8] that suit their needs best.

From there, the advertiser[9] that is willing to pay the asking price for the inventory — which is typically determined by the ad network’s algorithm — will get the inventory and ad creative[18]. In turn, the publishers will be paid for the number of ad impressions that get served, which is usually based on a type of revenue-share model. 

What Is an Ad Exchange?

An ad exchange[10] (advertising exchange) is another type of platform that involves buying and selling ad inventory. However, ad exchanges serve as more of a marketplace where supply and demand parties — advertisers, publishers, DSPs, SSPs, etc. — can buy and sell inventory directly and in real-time. Minus the need for an intermediary. 

Each transaction is based on the behavioral data of viewers, which is what allows publishers to determine their floor price to sell each impression[11] to the highest bidder[19].  

How Do Ad Exchanges Work?

With ad exchanges, both the publishers and advertisers use specific technology (SSPs for the publishers and DSPs for the advertisers) to connect to the ad exchange marketplace and engage in the transactions.

First, the publisher makes their inventory available via SSP on the ad exchange. They also make the full details such as the page location, audience, topics, URL, etc., available along with the inventory. 

Once a user enters the publisher’s site or app, an ad impression will automatically appear within the auction. From there, the user’s data is collected, sent to the SSP, and then transferred through the ad exchange. Then, the DSPs and other ad networks involved receive a bid request[12].

Each DSP[2] reviews the bid request and attached information provided before deciding on whether the impression is worthwhile to the advertisers. If there’s interest, the DSP sends a reply along with a maximum bid amount and the location of the ad copy intended to be placed onto the available ad space.  

Once this exchange has been made, the ad exchange reviews the bidding advertisers for each impression. From there, they’ll eliminate any advertisers who do not meet the publisher’s criteria — for example, the ad slot available is on a Chinese website and the publisher has a restriction set that only allows Chinese-language ads. Therefore, all the non-Chinese-language ads would be eliminated from the auction.

After gathering and analyzing all the data, the ad exchange sells off the impression to the highest bidder that meets all the publisher’s requirements. The winning advertising copy will appear right on the publisher’s site right in front of the user, as promised.

These auctions run at the speed of milliseconds, which means the user in question has no idea that a real-time bidding[3] process over an ad exchange has just taken place. The process also doesn’t disturb the user experience or mess with the page loading speed.

As you can see, ad exchanges are much more involved compared to ad networks.

Ad Networks Vs Ad Exchanges

Ad networks and ad exchanges are not the same. In some cases, they can become interchangeable, but they will always be different (intermediary company vs marketplace for ad media buying.)  

Let’s take a look at ad networks in comparison to ad exchanges on a point-by-point basis to give you a better idea of what we mean:

Ad NetworksAd Exchanges
Acts as a middleman between publishers and advertisersActs as an open ad marketplace for all parties involved
The “ad network” is usually a company, like Google AdSenseThe “ad exchange” is the technology that allows for direct, real-time bidding between publishers and advertisers
Used by publishers, advertisers, and agenciesUsed by publishers, advertisers, agencies, ad networks, other ad exchanges, ATDs, DSPs, and SSPs
Offers categories based on pre-segmented audience information that’s category-specific in accordance to bulk buying and sellingOffers an open pool of various types of ad inventory, Each ad exchange is based on impression-per-impression trades
Advertisers have no way of knowing which websites will be serving their ads and publishers have no way of knowing which companies will be buying their inventoryBoth advertisers and publishers will know exactly what to expect in terms of who is buying and which ads will be served. Some ad exchanges also allow advertisers to view competitors’ bids or even track the web pages where their ads are served
Offers usually include remnant inventory but will also include some premium inventoryOffers include all types of available inventory
Takes time to carry out the bidding processThe bidding process is concluded within milliseconds
Inventory costs remain stable and are determined by the ad network’s algorithmInventory costs fluctuate based on the advertiser’s incoming bids into the real-time bidding auction
Advertisers often overpay while publishers typically have less control over the optimization of their inventory and pricingAdvertisers are able to determine their own price floor[13] while publishers have more control over the value of each ad impression
Claim 100% fill rates, however, cannot fill your inventory completely leading to lower CPMSGuarantee higher fill rates plus better CPMS per ad impression — and often get you 100% fill rates without compromising your CPM[4]
Setup is incredibly easy as there are very few requirements other than adhering to the network’s requirementsRequires that you set up ad serves, line items, and more — although, if you use an SSP, most of the setup and ad optimization[14] will be taken care of
Most suitable for new or small-time publishers who are just starting to monetize their websitesMore suitable for mid-sized to premium publishers that are looking to generate page views by the millions each month

As you can see, ad networks and ad exchanges do serve the same purpose, but by design, they’re exact opposites. 

Which One Should You Choose?

When it comes down to choosing whether you should go with an ad network or an ad exchange to start selling your ad inventory, it really all comes down to your level of experience and what you’re looking for in terms of features and functionality. 

If you want to sell off ad inventory in bulk without being too hands-on, then signing up with an ad network is probably your best bet. Of course, if you want to sell more premium ad inventories in a real-time setting for a higher return, then you’ll want to go with an ad exchange.

Just keep in mind that setting up your ad exchange will be much more involved.

Conclusion

In the world of ad networks and ad exchanges, both serve a valuable purpose for both publishers and advertisers. Ultimately, the one you choose to use depends entirely on your needs. It also doesn’t hurt to utilize both as time goes on and you gain more experience within the ad tech[20] ecosystem, especially if you’re looking to maximize your monetization efforts.

Terms
1. Supply-Side Platform [SSP] ( SSP ) A technology platform that provides outsourced media selling and ad network management services for publishers. The business model resembles that of an ad network in that it aggregates ad inventory, however they serve publishers exclusively and do not provide services for advertisers (e.g., FreeWheel, SpotX).
2. Demand-Side Platform [DSP] ( DSP ) A Demand Side Platform or DSP is a platform where advertisers can buy digital inventory to easily and more directly connect with sellers in a programmatic and real-time ecosystem.
3. real-time bidding. Real-time bidding is a technology-driven auction process where ad impressions are bought and sold almost instantaneously. Once an advertiser wins a bid for an ad impression, their ad is shown on a website. Real-time bidding plays a crucial part in the digital advertising ecosystem together with other players such as ad exchanges and supply side platforms.
4. Cost Per Mille/Thousand [CPM] ( CPM ) Cost per mille, or thousand (mille = thousand in Latin). A pricing model in which advertisers pay for every 1000 impressions of their advertisement served. This is the standard basic pricing model for online advertising. See also CPC and CPA.
5. ad network. A company that serves as a broker between a group of publishers and a group of advertisers by aggregating inventory and audiences from numerous sources in a single buy. Ad networks traditionally aggregate unsold inventory from publishers in order to offer advertisers a consolidated and generally less expensive pool of impressions, but they can have a wide variety of business models and clients. In the context of ad trafficking and ad tech, the term "network" is generally taken to mean an ad network.

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