Ad networks play an important role in programmatic advertising by facilitating the process of buying and selling advertising inventory, providing access to a wide range of inventory, and offering technology solutions to optimize advertising campaigns. In this article, we will look at the features of ad exchange vs ad network, as well as their role in programmatic advertising.
What Is an Ad Network?
The Ad Network is a programmatic advertising technology platform that connects advertisers (companies or individuals who advertise online) with publishers (web publishers, website or app owners). The advertising network ensures effective advertising placement and helps optimize the process of buying/selling advertising inventory.
How Does the Ad Network Work?
Let’s divide the entire ad network process into 6 stages:
- Registration and connection of advertisers. Advertisers register on the network, determine the budget and goals of the advertising campaign, and use the advertising network tools to configure targeting parameters. This is necessary to ensure that the advertisement is displayed in front of the most interested audience.
- Registration and connection of publishers. Publishers provide access to advertising inventory and determine the conditions for advertising on their own platforms (websites, applications).
- Collection and aggregation of advertising inventory. The advertising network collects inventory from various web publishers. Advertising formats can be varied: from text ads and banners to advertising in audio and video format.
- Advertising. The advertising network uses its technological infrastructure to place advertisements on the relevant publisher sites. Bidding for advertising placements and impressions takes place on the ad exchange in real time (Real-Time Bidding, RTB). Ad exchange most often works in collaboration with SSP (Supply-Side Platform) and DSP (Demand-Side Platform). In this case, the SSP participates in bidding on the publisher’s side, and the DSP on the advertiser’s side. The main goal of SSP is to sell the publisher’s advertising inventory at the highest possible price. The main task that DSP solves is to buy placements as cheaply as possible.
- Tracking and analytics. The ad network tracks key metrics such as impressions and clicks and provides advertisers with reports and analytics to measure the results of advertising campaigns.
- Optimization and regulation. Ad networks optimize ad placement processes, use machine learning algorithms, and analyze data to improve efficiency. In addition, advertising networks ensure compliance with data privacy laws and regulations.
Difference Between Ad Network And Ad Exchange
The ad network is an advertising network that brings together many advertisers and publishers, allows you to manage advertising inventory and advertising campaigns, and tracks analytics and key indicators. Popular ad networks: Google Display Network, Amazon, Yahoo.
In turn, an ad exchange is an advertising exchange where trading takes place between the advertiser and the publisher and the cost of purchasing advertising is determined. Popular ad exchanges: DoubleClick (Google), Right Media (Yahoo), AdECN (Microsoft), OpenX, AdFox, and others. These are just the most popular solutions.
How Does the Ad Network Work?
In conclusion, let’s once again take a closer look at the interaction of all participants in programmatic advertising:
- The publisher connects to the advertising network.
- The advertising network communicates with the DSP – the advertiser demand platform. From a wide variety of materials (more than 1 million of them arrive per second), the advertising network selects the most relevant and useful ads for the site’s audience.
- From the user’s side, the process of displaying advertising is as follows:
- Let’s say a user is interested in music and is looking for information about the release of a new album by his favorite artist;
- Based on the user’s search queries and interests, the browser creates a user profile. User data may be collected by both websites (using their own or third-party browser cookies) and third-party DMP platforms;
- So the user visits the website. The advertising code tells the SSP about the user;
- Based on the data, a lot is formed and put up at the RTB auction.
- The DSP platform collects bids from advertisers and sends them to the SSP.
- The SSP searches for the highest bid and selects the winner using a second-price auction algorithm.
- The winner’s material is shown to the user. In this case, it will most likely be an advertisement for headphones or a music center.
- In simple words, an advertising network is an intermediary between an advertiser and a publisher.
Ad Network Payment Models
There are several payment models that the ad network uses to determine the cost of advertising:
- CPM (Cost-Per-Mille). The advertiser pays a flat rate per thousand ad impressions. An impression is the display of an advertisement in front of the user in the browser.
- CPC (Cost-Per-Click). The advertiser pays for each click on an ad made by a user.
- CPA (Cost Per Action). The advertiser pays for specific targeted user actions, such as filling out a form, registering, adding, or paying for a product.
The choice of a specific payment model depends on the goals of the advertising campaign, the target audience, and the advertiser’s strategy.
It is worth mentioning that an ad network can use its own system for internal exchange of advertising inventory, and does not necessarily need to turn to an external ad exchange.
Final Thoughts
An advertising network collects advertising inventory, and an advertising exchange acts as a market and helps sell it. Using the ad network, publishers can provide their own advertising inventory to more advertisers. Due to high competition, the cost of advertising placement and, ultimately, the earnings of publishers increase. Regardless of whether you choose an advertising exchange or an advertising network, we recommend turning to SmartHub, a provider of white-label solutions that will allow you to run both an ad exchange and an ad network. This approach will allow you to launch an effective advertising solution in the shortest possible time. Since 2013, SmartHub has launched a variety of advertising solutions that comply with IAB security and authorization standards, as well as support traffic scanners and comply with global privacy regulations such as GDPR and CCPA.
With over a decade in the tech field, Bogdan blends technical expertise with insights on business innovation in technology.
A regular contributor to TMS Outsource's blog, where you'll find sharp analyses on software development, tech business strategies, and global tech dynamics.
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