In the US alone, ad spending on mobile programmatic transactions increased by over 30% in 2019 and is expected to surpass $40 billion in 2020.1 With this scale comes many different players operating in different functions throughout the ad tech ecosystem. Publishers looking to market their apps through ads, in addition to advertisers looking to purchase audience-targeted inventory, find themselves picking from several technologies and partners.
In previous articles, we examined the differences between supply-side platforms (SSPs) and ad networks and looked into how demand-side platforms (DSPs) compare with SSPs. In this blog post, we’ll cast some light on the differences between ad networks and ad exchanges.
Although they share a similar purpose (collecting ad inventory from program publishers and offering it to advertisers) ad networks and ad exchanges are different elements of programmatic advertising. Let us begin by describing the roles they have within the in-app advertising ecosystem.
What Is an Ad Network?
Acting as intermediaries between advertisers and publishers, ad networks are online platforms that collect publisher inventories and segment them from the app category, consumer demographics, and ad formats. Buyers can inform the ad network of the campaign criteria, and the ad network can then match it to available inventory from publishers. Some ad networks have a key focus, such as pricing, scale of inventory, or special audience demographics.
What Is an Ad Exchange?
Ad exchanges are online marketplaces where both supply and demand partners (including publishers, advertisers, agencies, ad networks, DSPs, and SSPs) can buy and sell inventory directly, without involving any intermediary. Ad exchanges generally use real-time-bidding (RTB) technology to market off inventory on an impression-by-impression basis. While ad exchanges are open marketplaces for the entire ecosystem, ad networks essentially act as a middleman between advertisers and publishers.
Accuracy and Transparency
As discussed, many ad networks specialize in certain types of inventory and audience data — often termed’vertical ad networks’. These networks can be selected based on how well they represent an advertiser’s target audience. Otherwise, within an RTB ad exchange system, audience data is passed directly from the publisher to the open market, allowing for powerful and precise targeting options.
What’s more, when purchasing inventory through an ad network, advertisers do not have complete details of the programs serving their ads, and in turn, publishers are unaware of who is buying their ad spaces. By using an ad exchange, both parties are aware of the transaction and the parties involved, allowing advertisers to gain better control over where their ads are placed and the security of their brand.
Ad networks generally concentrate on offering first-tier inventory that has not been sold before. However, this frequently means that publishers can be left with unsold ad spaces. By comparison, ad exchanges offer all available inventory, including any remnants that may have been unsold, which maximizes publisher revenues.
Within an ad network, inventory pricing stays at a stable level as it is set by the network and based on value quotes and historical data. For ad exchanges, the stock price is dictated by bids from advertisers in real time and through the RTB auction mechanism. The price of impressions with ad exchanges is allowed to form organically and is influenced by competition in the market, allowing for more transparent transactions.
Although ad networks provided the first solution for advertisers looking to buy inventory at scale as opposed to directly from individual publishers, ad exchanges have advanced this technology even further. Since arriving in the business, ad exchanges have proven to be crucial for publishers, allowing them to ensure maximum value from their stock by auctioning it to the highest bidder. They have also been revolutionary for advertisers, allowing them to specify a maximum price which they’re prepared to pay for ad inventory and offering the best value for their ad spend.