This article will attempt to give you a clearer picture of the components of Ad Network vs Ad Exchange and how they are different from each other.
Quite often, when it comes to programmatic advertising and increasing online advertisement revenues, publishers have to struggle with a number of terms and jargon, and they find themselves in a tough spot trying to figure out what exactly is what! Ad Exchanges and Ad Networks are two such terms that publishers ought to be aware of and, of course, in a way that will work to their advantage.
The first thing to know about them is that they are not the same. However, both of them play pivotal roles in the programmatic ad model and are equally important for both publishers and advertisers as they go on to strategize their ad models.
This becomes all the more relevant considering programmatic sales in ads on a global level are projected to reach $725 billion by the year 2026.
In this blog, we have thrown light on Ad Exchange vs Ad Network to help publishers understand the nitty-gritty of each.
What is an Ad Network?
An Ad Network is actually a company or an enterprise which functions by purchasing ad inventory in bulk from the publishers and reselling it to the advertisers.
Ad Networks handle a huge number of impressions. This enables them to sort and categorize these impressions into segments, which the advertisers will be interested in when they have a specific target audience in mind.
So essentially, they can resell these impressions, which they bought in bulk, to advertisers as a new premium package and make huge profits out of them.
What is an Ad Exchange?
The Ad Exchange is nothing but a digital marketplace, where through the process of RTB or Real Time Bidding, the sale and purchase of ad inventory happens between publishers and advertisers, respectively.
The entire process of bidding auctions for each and every ad impression happen within a moment, all in real-time, and advertisers can issue the bids automatically through preset parameters of purchasing.
Another interesting thing to know about them is that they do not have any standalone existence. There were such standalone Ad Exchanges years back, but once the companies and advertising tools became aware of their revenue potential, they bought many of the Ad Exchanges that already existed.
Sometimes they would even create their own Ad Exchange and introduce them into their offerings. In fact, most of the SSPs have their own Ad Exchanges, which you will get access to when you function with that SSP.
Ad Network Vs Ad Exchange – How Are they Different?
Now that you know how each function, let’s try to understand ad exchange vs ad network.
To put it simply, ad exchanges offer a platform where publishers and advertisers can both conduct their business. Ad Networks, on the other hand, buy ad impressions in bulk from publishers only to repackage and resell them to advertisers at a slightly higher price These may be the very basic difference between the two, but there’s more than what meets the eye. Here are the points where they differ:
Function
Ad Network: Acting like a matchmaker for ads, ad networks collect ad inventory from publishers (both websites and apps). These collected ad spaces are then sold to advertisers. Then advertisers buy the ad spaces that match the look and feel of the ads and match the target audiences.
Ad Exchange: They act as an auction house where publishers and advertisers can buy and sell ad inventory in real-time.
Transparency
Ad Networks: Ad networks do not offer any transparency. Advertisers almost hardly get to know when and where their ads might appear or exactly who the parties are getting a cut from their budget. Publishers, too, don’t get much optimization control over their inventory and do not get any information on the advertisers.
Ad Exchanges: They offer transparency by informing advertisers about what changes are made in the transactions and ad inventory costs. This introduces complete transparency in the process of media buying. Publishers and advertisers are also aware of one another and the transactions that are conducted.
Inventory
The ad network is like an art gallery, they carefully pick and choose ad spaces from publishers for advertisers. They offer specially picked premium options for inventory, i.e. inventory that is high both in quality and price.
Ad Exchanges offer both premium as well as the extra, unsold options of inventory, which is also called remnant inventory. Like a marketplace, ad spaces are picked from a variety of sources like publishers (via SSPs), networks, and platforms. The ad spaces are bought and sold through real-time bidding (RTB).
Price Model
Ad Network: When it comes to Ad Networks, they take their shares by getting themselves a cut from the revenue. They generally use CPM (Cost Per Thousand Impressions) or CPC (Cost Per Click). They often have pre-defined prices.
Ad Exchange: They have a different setup altogether. They have three options for pricing:
Sell Margin
Publishers will pay a percentage of commission to the platform when an inventory is sold.
Setup Fee
They charge a flat fee for their inventory. This amount is not refundable.
Buy Margin
In this case, the advertisers pay a percentage of commission to ad exchanges when they buy an inventory.
| Fee Type | Publishers Pay? | Advertisers Pay? | Description |
|---|---|---|---|
| Sell Margin | ✅ Yes | ❌ No | % commission on publisher’s revenue from ad sales |
| Buy Margin | ❌ No | ✅ Yes | % commission advertisers pay in addition to the bid price |
| Setup Fee | ✅ Sometimes | ❌ No | One-time fee for publishers to onboard to the exchange |
Target Audience
Ad Network: Usually catering to ad agencies as well as advertisers, ad networks are a great choice for advertisers with smaller budgets.
Ad Exchange: They cater to advertisers with small and large budgets, Demand-Side-Platforms (DSPs), Supply-Side-Platforms or SSPs, as well as ad networks. Advertisers get to choose the target audience as per their niche, and publishers can choose ads that match the look and feel of their website.
Monetization
For Ad Networks, the price for the publishers remains fixed, i.e. the premium price. The charge may also be on the basis of per thousand impressions/click-throughs (CPMs/CPCs). This means that your payment will be dependent on how often an ad is clicked on or shown on your website.
In the case of Ad Exchanges, the price of the inventory fluctuates as it is determined by RTB or Real-Time Bidding.
Control
Ad Network: Advertisers buy bundled ad spaces through ad networks without any control over where each ad goes. With limited control over ad placements, ad networks offer convenience but no customization.
Ad Exchange: On the other hand, ad exchanges give full ownership to advertisers as they get to choose where the ad will be placed and what type of audience they want to target. They bid in real-time for what they want.
| Criteria | Ad Network | Ad Exchange |
| Function | Sells ad spaces in the form of bundles to advertisers | Act as a marketplace for buying and selling of ad inventory via RTB |
| Inventory Source | The selected group of publishers | DSP can access inventory from various publishers, networks, and platforms. |
| Pricing Model | Uses fixed price models, like CPM and CPC | Real-time bidding is used to buy and sell ad spaces |
| Transparency | Limited transparency to ad inventory | Advertisers and publishers can see the exact placement of ads. |
| Control | Offers limited control over ad placement | Provides full control over buying and selling of ad inventory. |
| Target Audience | Ideal for smaller budget | Suited for advertisers who want advanced targeting for ads. |
| Ad Types | Standard display and video ads | Includes display, video, native ads |
How Does Ad Network Function?
In order to sell inventory, publishers use a Supply-Side Platform or SSP to offer their ad inventory to the Ad Exchanges. They offer all necessary information to the SSP, which includes price floor amount, page location as well as buyer personas.
On the other hand, the advertisers use DSP or the Demand-Side-Platform to connect with an Ad Exchange to buy ad space. Now, when a user visits the website or the mobile app of the publisher, an ad request goes out to DSPs and a number of Ad Exchanges via the ad server of the publisher.
As soon as the ad request is sent, the Ad Exchanges immediately send a bid request to the Demand-Side-Platforms.
Now it is up to the DSPs to decide whether that specific bid request will be of interest to the advertiser.
If the results are positive, the DSPs will respond to these Ad Exchanges along with the info they require.
This information is then analyzed by the Ad Exchanges to figure out the best bidder for that specific inventory. The Exchange then selects the most suitable and the highest bidder while the ad goes live. All of these processes are executed and completed in milliseconds, making the ad delivery process faster and smoother.
How Does Ad Exchange Function?
In order to sell inventory, a publisher will make use of a Supply-Side Platform or SSP to offer their ad inventory to the Ad Exchanges. They offer all necessary information to the SSP, which includes price floor amount, page location as well as buyer personas.
On the other hand, the advertiser will take the help of the DSP or the Demand-Side-Platform to connect with an Ad Exchange for the additional space. Now, when a user visits the website or the mobile app of the publisher, an ad request goes out to DSPs and a number of Ad Exchanges via the ad server of the publisher.
As soon as the ad request is sent, the Ad Exchanges immediately send a bid request to the Demand-Side-Platforms.
Now it is up to the DSPs to decide whether that specific bid request will be of interest to the advertiser.
If the results are positive, the DSPs will respond to these Ad Exchanges along with the info they require.
This information is then analyzed by the Ad Exchanges to figure out the best bidder for that specific inventory. The Exchange then selects the most suitable and the highest bidder while the ad goes live. The best part is that it all happens in milliseconds.
Benefits of Ad Exchange
- Ad exchanges increase demand by bringing multiple bidding for the ad spaces and boosting publishers’ ad revenue.
- Ad Exchanges offer transparency regarding the biddings on publishers’ ad spaces, a publisher can easily see who is bidding and at what price.
- Publishers get to choose what appears on their website. They can select and control the type of ad they want on their website.
- Ad exchanges allow advertisers to choose ad spaces on the basis of the target audience and budget they want through real-time bidding (RTB)
Benefits of Ad Network
- Ad networks automatically connect premium publishers with top-notch demand partners saving time and effort in finding a perfect fit for ad spaces. Ad network does the heavy lifting for both advertisers and publishers
- For Publishers ad networks offer better ROI by selling ad inventory at high prices. On the other hand, advertisers enjoy good ROI by getting their hands on premium ad spaces with good no. of ad impressions.
- Without any hassle publishers and advertisers can buy and sell ad inventory at fixed prices, leaving no room for haggling with negotiating prices.
Types of Ad Networks vs Ad Exchanges
Types of Ad Networks:
- Vertical Networks
- Premium Networks
- Blind or Horizontal Networks
- Vertical Networks
- Inventory-Specific or Specialized Networks
- Affiliate and Performance Networks
Types of Ad Exchanges:
- Private Exchanges
- Open Exchanges
- Preferred Deals
In a Nutshell: Ad Exchange vs Ad Network
In this debate regarding Ad Exchange V/s Ad Network, usually, the Ad Exchanges seem to be the winner when it comes to the publishers. However, it is fair to say that every case is different. But the main reason for this is that Ad Exchanges choose the publishers and their revenue as their priority, rather than fixed pricing models that may undervalue ad space.
There is, however, one thing to remember, and that is that ad networks sometimes comprise a healthy strategy for ad revenues. Google AdSense happens to be one of the best steps that a startup publisher can take while generating revenue.
Therefore, the smart thing is to weigh all the options and make an informed decision for benefits in the long run.
Still confused? Consult our experts to help you choose the right option between ad networks or ad exchanges, sign up here.
FAQs
An Ad Network is a platform that connects advertisers with publishers to deliver and display advertisements to target audiences.
An Ad Network operates by aggregating ad space from multiple publishers and selling it to advertisers. Advertisers create campaigns and bid for ad placements, and the network uses algorithms to determine where to place the ads for maximum impact and return on investment.
Ad Networks provide convenience and efficiency for both advertisers and publishers. Advertisers benefit from access to a large pool of publishers and the ability to target specific demographics, while publishers benefit from increased ad revenue and reduced need for sales and marketing efforts.
An Ad Exchange is a platform that enables the buying and selling of ad inventory through real-time bidding.
Ad Exchanges work by connecting advertisers and publishers in a centralized marketplace where they can buy and sell ad inventory in real time. Advertisers place bids on ad inventory they are interested in, and the exchange uses algorithms to determine the highest bid and allocate the ad space accordingly.
Ad Exchanges offer benefits for both advertisers and publishers, including increased transparency, more efficient ad buying and selling processes, and the ability to target specific audiences.
Ad exchanges are like a marketplace where advertisers and publishers buy and sell ad spaces through real-time bidding (RTB). On the other hand, ad networks, are middlemen between DSP and SSP. They make bundles of ad inventory from various publishers and sell them to advertisers at a fixed price.
