Key Points

  • Ad exchanges and ad networks are distinct entities that serve different purposes within the digital advertising space.
  • Ad networks are like the stores in the mall, while ad exchanges are like the mall itself.
  • Both ad networks and ad exchanges have been absorbed into other ad tech tools over time.

Publishers get a lot of terminology thrown at them as they try to grow their online advertising revenue. It doesn't take long before people start shouting terms like ad exchange and ad network at you, and it can be tough to understand the difference between all the tools - much less which one is best for your revenue.

Playwire is here to help. Our entire approach is based on putting publishers first, and part of that involves helping publishers understand all the pieces of the ad tech stack. For this particular post, we're going to take on the ad exchange vs. ad network debate. Read on to learn the definitions, differences, and which one you should choose.

Ad exchange or ad network? You don't have to make this choice alone. Reach out to Playwire. We'll curate, implement and manage all the right tools and platforms to build your ad tech stack into a revenue machine.

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What Is an Ad Exchange?

An ad exchange is a digital marketplace in which a publisher sells their ad inventory and an advertiser purchases it via real-time bidding (RTB) auctions. These bidding auctions for each individual ad impression take place in real-time, and advertisers issue bids automatically based on their pre-set purchasing parameters.

The other thing to know about ad exchanges is this: They don't exist - or not as standalone offerings, anyway. Years ago, ad exchanges were a standalone offering, but as other advertising tools and companies saw the revenue potential they presented, they purchased multiple ad exchanges that already existed or created their own and rolled them into other offerings. For instance, most supply-side platforms (SSPs) maintain ad exchanges that you only get access to if you work with the SSP. 

What Is an Ad Network?

An ad network is a company. This company purchases advertising inventory from publishers in bulk and resells it to advertisers. If you're thinking "middle man," you're on the right track. 

An advertising network often manages enormous amounts of impressions. These large quantities allow them to sort and organize the impressions into categories and segments that may be appealing to advertisers looking to target particular markets or audiences. In this way, they can repackage bulk-bought impressions as premium inventory and sell them for a profit.

The Differences Between Ad Exchanges and Ad Networks

The easiest way to understand the difference between ad exchanges and ad networks is through an analogy: Ad exchanges are like the physical buildings we call shopping malls, and ad networks are like the stores inside shopping malls. 

An advertising exchange provides a place or platform in which advertisers and publishers can do business. And in the same way, retailers purchase brand-name products and resell them for a profit, and ad networks purchase impressions from publishers and resell them at higher prices to advertisers.

That's the core of the differences between these two tools, but there's more to the story. Below, we discuss some of the other ways in which ad networks and ad exchanges are different.

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How They Make Money

Ad networks make their money by purchasing ad inventory, or ad space, in bulk at low prices and selling it to advertisers for more than they bought it for. They survive - and many thrive - on that margin.

Meanwhile, ad exchanges make a small amount of money on each dollar that flows through their ecosystem. Usually, this amount of money is expressed as a percentage of each dollar spent.

Who They Prioritize

We can't make sweeping generalizations about whether ad networks and exchanges care more about publishers or advertisers because every company and platform is different. However, as a function of how they make money, ad networks prioritize their own profits at the expense of publishers' revenue.

That's because ad networks make more money if they can buy your ad inventory for less, and that means you make less money. Ad exchanges, on the other hand, make more money when more money is spent inside their platforms, so it's better for them if publishers sell their advertising inventory for higher prices.

How They Function

Ad exchanges are programmatic advertising platforms, which means they're a piece of technology that facilitates the most automated media buying and selling of digital advertising within the advertising space. There may be a company that surrounds that ad exchange, but at its core, it's a piece of programmatic ad-buying tech.

Ad networks are the inverse. They are, at their core, companies that operate like middlemen. They may incorporate RTB and other programmatic advertising tech to facilitate their business, but they're companies first and platforms second.

Ad Exchange vs. Ad Network: Which One Should Publishers Choose?

Every case is different, but in the ad exchange vs. ad network debate, ad exchanges usually come out ahead for publishers. That's simply because they prioritize the publisher and their ad revenue and, unlike ad networks, have no motive to try to undersell publishers.

There's a big "however" to add to that, however: Ad networks can be a part of a healthy ad revenue strategy. In fact, one of the best, if not the best ad network - Google AdSense - is often the first step on a startup publisher's journey to bringing in real revenue.

Even later in the publisher evolution, ad networks can broaden demand so that no ad impression goes unsold. 

Ad Exchange, Ad Network, or Playwire?

After reading this, you may feel like you have to take a side in the ad exchange vs. ad network fight. But you don't have to. Ad exchanges tend to be better for publishers, but ad networks have their place in some revenue optimization strategies. And you don't have to figure all this out for yourself.

Instead, you can simply work with Playwire. Our team will help worry about ad exchanges, ad networks, and similar concerns to maximize your revenue while you focus on building your target audience and creating incredible content.

If that sounds good to you, reach out to us. Contact Playwire online today.

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