Most websites utilise ad networks and exchanges in some way to monetise their content, with larger sites selling their own ads directly before sending unsold inventory to them, and smaller websites sending them most if not all their inventory from the start. However, there is some misunderstandings and overlap between the two concepts, so a longer explanation is necessary.
An ad network maintains a network of websites and blogs that fulfil certain entry requirements such as content niches and traffic levels. They also build and maintain relationships with large numbers of advertisers, to which they sell the advertising inventory provided by their network of sites at varying prices and on varying terms. The advertisers’ ads are then displayed on either all or a selection of the sites within the ad network’s network of sites so as to best match the demographic that the advertiser has paid to target, which can be based around the content niche of the sites, or behavioural targeting techniques, or other factors.
As the ads are being displayed, the ad network is constantly working to optimise the campaign – removing it from sites where it is not converting and weighting it more heavily where the advertiser is getting a better ROI. Through these optimisation techniques, the ad network is able to charge higher prices for ads across its network, which then means higher eCPMs and payouts for its publishers.
Similarly to an ad network, an ad exchange has a roster of websites which they represent. However, ad exchanges often have much lower entry requirements or even none at all, so there tends to be many more sites involved and of a more varied quality and from more varied content niches.
Ad exchanges provide a level platform where publishers, advertisers, and ad networks can all buy and sell ad space using a real-time bidding system. Each impression is bid on separately and automatically to get the advertiser or ad network the lowest price available for the ad inventory they want to buy, and to get publishers the highest price available for the ad space they want to sell. Due to the large volume of ad inventory available on these exchanges, prices are often very attractive to advertisers, whilst they still offer publishers a way of monetising any inventory that they were not able to sell privately or through a more traditional ad network.