Ad Networks vs. Ad Exchanges vs. DSPs – What’s the difference?

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Estimated Reading Time: 5 minutes, 22 seconds
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Marketing Specialist
Last updated
November 9, 2018

If you’re only getting started in the world of crypto advertising, things might be a little bit confusing.

But don’t worry. You’re not the only one.

The technological evolution has brought many changes to the online advertising industry, and things like programmatic advertising, DSPs (Demand-Side Platforms), or Ad Networks are sure to cause at least a couple of migraines.

So let’s see what the fuss is all about.

The Evolution of Display Advertising

Before diving into all the different platforms and technologies available in today’s advertising industry, let’s go back and talk a little about what display advertising is.

Display advertising is a type of online advertising that can take a variety of shapes and forms, from the basic banner ads to interactive multi-media banners, or even plain text. These ads are published on various websites in order for the users to either interact with them (clicks) or to simply view them (impressions).

display advertising explained

Initially, the whole process of displaying ads was really simple, with only 3 parties being involved – advertisers, publishers, and users.

Whenever advertisers had a project or a business they wanted to promote, they would approach publishers and pay them in exchange for exposure. The advertisers’ banners would get displayed on the publishers’ websites, and thus right in front of users.

However, this process turned out to favorize mainly large publishers with huge audiences. Since advertisers wanted to display their banners to as many people as possible, most of the publishers were simply considered too small to do business with.

And that’s where Ad Networks came in.

How Ad Networks Saved The Day

Ad Networks started partnering with publishers regardless of their size, thus creating a network of publishers with the capability to deliver huge numbers of impressions or clicks.

They acquired traffic inventory from publishers, segmented it, then sold it to advertisers in bulk, based on CPC (cost per click) or CPM (cost per mille/cost per thousand impressions) models. And suddenly, both parties were happy. Advertisers got the exposure they wanted, and publishers got an additional revenue stream.

how do ad networks work

But what about the users?

Turns out, grouping together a large number of publishers who don’t have that much in common regarding their content is a bad idea.

While Ad Networks were struggling to fix the problems of the industry, they unknowingly created others.

Most Ad Networks kept their publisher network rather private. Most of the times, advertisers had no idea about what websites their ads got displayed on, and more often than not their brand was associated with low-quality websites, or websites with pornographic content.

The ads didn’t really do much for the user’s experience either. Most of the times, an add had almost nothing to do with the content of the website it was displayed on. This created negative or even frustrating experiences for the users and drove them away from both the publisher’s website and the advertiser’s ad.

As the market developed, the number of Ad Networks increased, fragmenting it bit by bit. Every Ad Network created its own network of publishers, and advertising to large audiences became increasingly harder.

Introducing Ad Exchanges

Basically, an Ad Exchange is a digital marketplace where people can buy and sell advertising spaces based on a RTB (real-time bidding) system.

As opposed to the Ad Network’s traditional price negotiation technique, Ad Exchanges are more technology-driven, with automated systems facilitating the bidding process between advertisers and publishers.

Ad Exchanges helped publishers maximize their traffic inventory, and advertisers by making the whole process more transparent and trustworthy. This way, advertisers now could purchase traffic directly from a variety of publishers, without having to negotiate directly to each and every single one of them.

Illustration explaining how ad exchanges work

So…what’s the catch?

Well, to be honest with you, Ad Exchanges are a little bit like the Wild West. Every day, billions of ad impressions flow through these digital marketplaces, and it’s nearly impossible to keep track of all the sellers and buyers.

Ad Exchanges lack regulations, so it is usually rather difficult to tell where your ads will show up (or who is bidding for your ads).

SIDENOTE. A report conducted by Telemetry and published on BusinessInsider estimates that advertisers waste around $7 million a month on fraudulent clicks, most of it coming from botnets.

So what is a DSP?

DSPs are very similar to Ad Exchanges. A DSP (Demand-Side Platform) is a software used to purchase advertising space automatically, thus removing the human ad buyers and salespeople from the process. This process is commonly known as programmatic advertising.

demand side platforms explained

DSPs help advertisers purchase traffic or impressions across a broad network of publishers but targeted to specific users based on demographics, location, or previous browsing behavior.

The whole bidding process takes place through an Ad Exchange, where Publishers list their available ad space for bidding. The DSPs then automatically decide which spaces to buy for the advertiser, and acquires them through real-time bidding. And while this may sound like a highly complicated process, it actually happens in milliseconds, while the user’s computer loads a webpage.

When compared to Ad Networks and Ad Exchanges, one of the main benefits of DSPs is the ability to buy, serve and track ads using a single tool.

Moreso, DSPs provide an advertiser with a large variety of tools that can highly improve their campaign performance, such as contextual targeting, retargeting, frequency cap, and more.

So, you might be wondering, are these the final days of Ad Networks and Ad Exchanges?

Well, probably not.

As technology advances, the line between Ad Networks, Ad Exchanges, and DSPs is blurring.

Today, most Ad Networks have incorporated numerous tools used by DSPs, such as audience targeting, impression capping, and bidding system. At the same time, DSPs find themselves buying, repackaging and selling traffic inventory to advertisers at a premium.

When it comes down to comparing them, we can see that there aren’t that many differences between Ad Networks, Ad Exchanges, and DSPs. But that doesn’t mean they aren’t important.

Final Thoughts

Despite its automation, DSPs will never be able to drop one of the most fundamental parts of the advertising – the human contact.

No matter how efficient the process of buying and selling ads becomes, businesses will always need someone to help them optimize their campaigns, to answer their questions, and to help them get their campaign on the right track.