Part IV: The Ad Network Is Dead, Long Live the Ad Exchange
I’ve written a few times about Ad Exchanges on this site, as they are one of the more exciting areas to think about in digital advertising right now. Ad Exchanges such as Google Exchange, Right Media Exchange, or Microsoft Exchange are an elegant solution to this mess of redirects and inefficient monetization for the industry at large and offer the revolutionary opportunity to do true audience targeting. Via an ad exchange, sellers can auction their inventory to the highest bidder through a single redirect, and buyers can evaluate and bid on that inventory impression by impression using rich pools of their own or 3rd party data. This rich targeting gives ad exchanges a big advantage over ad networks in terms of transparency and targeting capabilities and since ad exchanges aggregate the inventory from thousands of publishers in the same place, exchanges also offer exponentially more reach than any ad network ever could. Combine that with the fact that the exchange is also highly transparent in terms of pricing and doesn’t mask a markup on the media like an ad network, and you can see why both advertisers and publishers are pretty excited about the ad exchange opportunity.
Of course, if your business is optimizing ad network spend, the exchange is actually a threat, since the exchange aims to do exactly the same thing as a network optimizer, but just on a larger scale and therefore, with greater efficiency. But unlike many of the ad networks out there, the network optimizers weren’t just an office of sales people, they had real technology, teams of developers, and knew how to build product. So instead of trying to push publishers away from the ad exchanges, they’ve for the most part embraced ad exchanges and real-time-buying (RTB) systems, and have worked to aggressively assimilate demand from the ad exchanges into their auction and optimization algorithms. RTB is certainly a growth area for digital advertising, but since ad networks still provide about 70 – 80% of the demand dollars out there most publishers can’t walk away from that source of revenue just yet.
Hard to say exactly where this will all land, but it should be interesting to find out!
Read the prior sections of this series: