Demystifying network mediation and ad exchanges

As the business of display advertising becomes more efficient for advertisers and publishers, exchange4media highlights the differences between network mediation and ad exchange

e4m by Abhinn Shreshtha
Updated: Jun 10, 2014 8:23 AM
Demystifying network mediation and ad exchanges

For a publisher, monetising digital or mobile real-estate is an important consideration. However, the nitty-gritty of inventory management can be avoided, for which there are a number of technology solutions that ensure transparent and efficient ad sales. With the digital landscape constantly evolving, it becomes hard to distinguish between the various options available. Keeping this in mind, exchange4media takes a look at network mediation and ad exchange.

The ad network
In the early days of digital advertising, ad networks were the prevalent platform to carry out transactions (apart from direct selling). An ad network would accumulate inventory from a number of registered publishers and provide it to the advertiser, who could then choose depending on his requirement. The ad network would buy inventory at ‘x’ and sell it to the advertiser at ‘x+n’, thus earning a profit. However, ad networks were prone to demand-supply imbalances, leading to different ad networks forming ad hoc arrangements between themselves for sharing of inventory and/or ad requests. This created a chaotic scenario and reduced visibility with respect to the network the ads were getting served from.

Enter the ad exchange
The ad exchange eliminated this drawback of the ad network model by providing a single point of interaction for publishers, advertisers, and even ad networks. The ad exchange offers a huge collection of inventory drawn from thousands of websites across the world (depending on the scale of the particular ad exchange). The advertiser chooses the inventory that best fits his parameters. The transactions are simplified and transparent and it benefits all parties, without the need of a middle man.

One of the popular methods to buy ad spots is a near instantaneous auctioning process, known as Real-time Bidding (RTB). RTB allows advertisers to place bids for inventory they are interested in through Demand Side Platforms (DSPs), with the highest received bid winning the ad spot. The process is completely automated and very fast.

Where does network mediation come in?
The ad exchange is a marketplace where advertisers can buy relevant inventories through an auction process. It is an interface for advertisers and publishers to interact.

So, what happens if a publisher has a lot of unsold inventory? This is where network mediation comes in. Network mediation or ad network mediation can be defined as “an ad tracking platform that is integrated with multiple ad networks at the API level”. It assists the publisher in optimising his inventory by increasing fill rate through targeting specific ad networks that are decided before hand. Mediation platforms are essentially Supply Side Platforms (SSP), which are used to optimize backfill or unsold ad spots.

How does it work? A publisher with a lot of unsold inventory can approach companies called mediators, which have partnerships with various ad networks and have a ‘mediation’ platform that serves as the dashboard for carrying out transactions. To start off, the publisher needs to select the ad networks that he is interested in, download their SDKs and install them on his app. He can now set priority levels (in terms of ad traffic percentage) for the selected ad networks on the mediation platform. The mediation platform will then send ad requests to the selected networks, depending on the priority setting and moving in a descending order of priority. An ad exchange approaches all potential buyers simultaneously.

If the highest priority target does not respond, the system shifts the ad request to the next in line. The one chosen is the ad network which responds first. Again, in an ad exchange, it is the highest bidder which gets the ad spot.

The main advantage of network mediation is that it allows publishers to prioritise backfills, giving them a higher chance of selling out unsold inventory. Some even claim that by using mediation platforms, a publisher can increase backfills by 100 per cent.

A digital marketplace
An ad exchange is a digital marketplace for advertisers and publishers to buy and sell ad inventory in an automated, simple and efficient manner. It is basically a big pool of publisher impressions. On the other hand, ad network mediation is a publisher tool (SSP) for optimising unsold inventory and managing ad sales across specific ad networks, which can be configured according to priority. There are other differences in how both platforms work – prioritised selling v/s open auction, serial approach v/s simultaneous approach, and so on.

As a publisher, one can think of network mediation as supplementary to ad exchanges, just as private networks are increasingly being used by larger publishers to increase the chances that more inventory is sold and at a higher price. A combined strategy that utilises both platforms can enable publishers to more effectively sell their ad inventory.

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