Online advertising has shown innovative paths to target millions and billions of users worldwide. Traditionally, TV and print channels were used for advertising. Today, the amount spent on digital product advertisement is over $695.96 billion annually. Marketing campaigns are launched via email, search, social, display, and, more recently, mobile. In the era of digital advertising, the use of Ad Networks and Ad Exchange programs is playing a vital role. Let’s have a look at Ad Network vs. Ad Exchange.
The Evolution of Digital Advertising
Publishers and advertisers sought ways to manage their buying and selling needs efficiently. The advertisers faced the challenge of making their campaigns reach a rapidly increasing number of audiences, while the publishers wanted to increase their revenue. Eventually, the first Ad Network was created.
In the early 90s, as more websites and apps were launched, a need to connect millions of advertisers to the billions in unsold inventory grew. This paved the path for the creation of Ad Exchanges. The online trading platform facilitated bulk buying and selling, bringing more transparency into the system. The advertising system saw a major shift, with the internal sales team giving way to agencies. Today, advertisers use a blend of both Ad Networks and Ad Exchanges.
What is an Ad Network?
An Ad Network is an online arbitrage platform where the publishers (sellers) sell their Ad inventory to the advertisers/agencies (buyers). The sellers first categorize their offerings based on age, gender, geographic location, etc. The buyers can connect with the seller according to their requirements.
Ad Networks allow publishers to sell their unsold or non-premium inventory directly to advertisers. A publisher connects to multiple Ad Networks and generates the maximum revenue possible. Advertisers are presented with a wide range of options to choose from. They can reach the maximum number of their target audience. The Ad campaign cost decreases because they do not need to connect to publishers individually.
What is an Ad Exchange?
Ad exchanges brought buying and selling ads into an open space, the online marketplace. It allowed the publishers, advertisers, agencies, Ad Networks, DSPs, and SSPs to buy and sell their Ad inventory. The inventory is auctioned to the highest bidder on an impression-by-impression basis. Real-time bidding (RTB) allows the whole process to be completed in almost no time.
The publishers get their inventory’s maximum value (market price) since ads are auctioned to the highest bidder. Advertisers can set the price for the Ad inventory so they are satisfied with getting the best value for their Ad spends.
The Major Difference between Ad Network and Ad Exchange (Ad Network vs Ad Exchange)
Here, we have summarized the major differences between Ad Networks and Ad Exchanges.
Ad Network
1. Key Innovation
- Enabled to meet the needs of advertisers and publishers to buy and sell inventory, respectively
- A mechanism to sell non-premium inventory
- Brought efficiency and transparency
For Publishers
- Can sell across advertisers and other networks
- Can sell unsold inventory
- Can deliver creative content across various websites
For Advertisers
- Access to a large range of publishers
- Able to reach a wide range of audiences
- Coordinate Ad campaigns across sites
2. Inventory Category
Non-premium/remnant inventory
3. Ad Target
Contextual bulk buying and selling
4. Key Players
- Google Ads/Google AdSense
- Bing Ads
- Yahoo Publisher Network
- AOL’s Advertising.com
5. Pricing
Negotiation is possible based on the Media Inventory
6. Key Challenges
- New intermediaries introduced
- Complex transactions
- Overheads and other costs lead to a lesser share of the same ad
For Publishers
- Require more time and effort to sell and deliver
- Lesser transparency
- No inventory optimization (for best advertisers)
For Advertisers
- Require more time and effort to buy and track ads
- Not able to control the inventory quality and performance
7. Transparency Quotient
Blind network with limited transparency.
For Publisher
Doesn’t know who is buying and at what cost.
For Advertiser
Doesn’t know who sees the ads.
8. Benefits of Ad Network
A centralized pool of Ad inventory cuts off the need to search sites individually.
9. Limitations
- Lack of transparency
- Fixed cost of all impressions
- Not fully automated- need of an Insertion Order to contract each buying
Ad Exchange
1. Key Innovation
- More transparency
- Improved targeting (auctioning of impressions is done with real data in real-time among multiple bidders)
- Reduced operational cost (direct buying and selling removed intermediaries)
For Publishers
- Get the best price of impressions under competitive bidding
For Advertisers
- Decisions related to buying, budgeting, and targeting are taken based on data
- Could make a flexible budget spends
- Provision to define maximum bid value for given impressions (since targeting customers is now easier)
2. Inventory Category
- Non-premium / remnant inventory
- Used for the lowest denominator Ad formats
3. Ad Target
- Behavioral approach
- Per impression, buy and sell
4. Key Players
- Microsoft Ad Exchange
- AppNexus
- DoubleClick Exchange
- Yahoo Right Media
- OpenX Market (OpenX)
- AdECN (Microsoft)
- Readwhere
5. Pricing
Real-Time Bidding
6. Key Challenge
- Poor quality inventory
- Selling remnant inventory at the lowest prices
- The potential for rich media buying and selling is limited
For Publishers
Faces challenges in revenue generation.
For Advertisers
Quality is a major concern, and we need a semantic filtration medium to verify the Ad service.
7. Transparency Quotient
More transparent compared to Ad networks
For Publisher
Optimization of inventory is possible since they know who is buying and at what cost
For Advertiser
Data on impression levels help target users
8. Benefits of Ad Exchange
- Transparency (can choose publishers)
- User-friendly bidding environment (can choose what amount of CPM you want to pay)
9. Limitations
- Limited inventory (access only to the sites within the exchange)
- Access to specific channels only (some Ad exchanges specialize in video or mobile, so to reach all channels, you will need to access multiple Ad exchanges)
Ad exchanges continue the work of Ad networks, bringing them to an open online marketplace. At a certain point, the distinction between them becomes very blurry. An Ad exchange also facilitates the buying and selling of Ad inventory from multiple Ad networks, whereas other Ad networks also buy inventory from Ad exchanges.
The Ad networks still play an important role in bulk buying and selling, and Ad exchanges have brought more transparency and flexibility. They have their specific roles to play. Which one to choose depends on the varied needs of the users.
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