Advertising technology deathmatch: Network vs Mediation vs. Exchange

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Kevin Ford

September 22nd, 2015

Originally published by Pocket Gamer — Picture your favorite fighting game and the attributes that separate your average fighter from the ultimate champion. The champion is the fighter best able to deploy power, agility, endurance, and speed.

In this post, we provide a comparison between ad networks, ad mediation solutions, and ad exchanges to help you decide who the champion fighter is.

First off, let’s define these three terms:

  • Ad network: A company that connects advertisers to app publishers that host ads.
  • Ad mediation: An ad tracking platform for publishers that allows for the automatic or manual allocation of inventory across multiple ad networks in order to maximize fill rates and effective revenue.
  • Ad exchange: A technology platform that facilitates automated auction-based pricing and buying in real-time between advertiser demand (advertisers, ad networks, and other demand sources) and publisher ad supply.

Although these platforms are relatively similar in their overall function, there are a handful of important aspects in which they differ.

Strength of advertiser relationships

Ad networks and ad exchanges usually have direct advertiser relationships with the buyer or the buyer’s agent whereas ad mediation solutions rely on the ad networks to manage the advertiser relationship.

This is important because the more direct you are to the buyer the greater portion of the profits you capture as there are fewer mouths to feed and you are better able to manage pricing for that advertiser.

Let’s consider a simple pricing example. An advertiser is buying your inventory through ten different ad networks due to your use of ad mediation. Your advertiser notices that one of them is offering lower rates for your inventory so they allocate their entire spend for your inventory to that network and you get stuck with lower bids than the advertiser was willing to pay.

A problem ad networks have is scaling a sales team to go after every geo and market segment. Most markets are dominated by local players. In China for example, the local leading performance ad networks have 10 to 20 times the number of local sales staff compared to the top global performance ad networks.

 

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The local ad provider is able to provide superior performance to the global ad network for China and it becomes a performance gap for the global ad network compared to the mediation solution and exchange that source from the local ad network.

The ad exchange leverages both direct and indirect advertiser relationships to provide maximum fill, at the highest possible prices, across the globe.

Native ad customization

There is a lot of buzz in the industry about native ad formats and for good reason. The response rates for ad formats customized for the publisher’s app are multiple factors of performance higher than those that aren’t.

The challenge is how to innovate on the publisher side yet make it simple enough for the demand side to support at scale. Ad networks and exchanges have the ability to define standards for advertisers to conform to and seek out the partners that will support it.

Since ad exchanges typically ingest every ad, and doesn’t simply manage the ad tag or SDK like ad mediation solutions, it is better suited to create a consistent native ad customization for the publisher.

Optimizing every impression

Ad mediation solutions work by prioritizing ad networks in to different levels with the first level getting the first access to an impression, followed by the second level if the first level passes, and so on.

The ad network in the second level will sometimes have a higher paying ad than the first level but not get to buy the impression because they don’t get access to it until the first level passes causing a sub-optimal prioritization for many impressions.

Another challenge for ad mediation solutions is that data is not shared about which ad is served by each network. This can lead to a user seeing the same ad 25 times in a row despite the fact that only the first 2 or 3 impressions have any meaningful likelihood of capturing a user’s attention and response (the rest just annoy them).

By working with a single ad network, or ad exchange, you provide them the data they need to take all of the ads served to a user into consideration.

Effective prioritization of demand sources and the optimal frequency of ads to serve to a user are just the tip of the iceberg when it comes to how much more efficient ad exchanges are in supporting optimization compared to ad network and ad mediation solutions.

Ad exchanges allow agents on behalf of the advertiser to buy advertising programmatically. Programmatic buying allows the advertiser to leverage its own data, along with third party data, and its agent’s data science to submit bids that more effectively match the advertiser’s objectives. This added efficiency leads to larger aggregate spends.

Game over

The knock-out clearly belongs to the ad exchange; providing maximum fill rates at the highest possible prices, native ad customization, and the most effective demand source prioritization.

Kevin Ford

Marketing Manager

2015-09-22

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