Advertising Network Platform PK Advertising Exchange Platform

William Gu, The author of this article, the head of research and vice president of hdtMEDIA. Currently, the research field of William includes advertising trading, data management platform, large capacity data processing and mining, cloud computing, audience targeting and large scale parallel computing.

Recently, several new platforms are discussed, especially for the advertising trading platform, such as Demand Side Platform (DSP), Data Management Platform (DMP), Advertising Exchange Platform, Supplier Side Platform (SSP) (all the platforms we mention in this article are called advertising trading platform). Those platforms may become to the main platform on display advertising, and replace the current advertising network platforms or others. Such reports have already existed in abroad and believe that advertising trading platform increases the advertising effect. The famous SSP technology supplier PubMatic track the Real-time bidding system effect with the other four famous DSP companies. The result is amazing, the advertising effect increases 749% and the media income increases 64%. We know that this new business model is entering into the display advertising field and will occupies the key position because of a series ventures in advertising trading aspect in 2007, the current purchase behaviors and new platforms in China. In that case, we do not know whether the advertising network which is popular during those two years may disappear in the future or not. Comparing with the advertising trading platform, whether the advertising network may become useless or not. As a researcher of this industry, it is my pleasure to share my opinions that based on several foreign documents.

In order to get a better understanding on the difference between those two platforms, we need to know what is the advertising network platform and advertising trading platform firstly.

According to the Wikipedia, the advertising network builds a relationship between advertiser and website. The key function is to integrate advertising resources, and meet advertisers¡¯ demands. The advertising network can do the targeting, showcase tracing and provide reports by using advertising on the server. While the advertising trading platform is a technical platform which is bidding based on the flow of advertising networks.

The advertising network can be divided into three types. There are vertical advertising network, blind advertising network and directional advertising network. The vertical advertising network usually chooses the relevant vertical media according to the main demands of brand advertisers. For example, car advertising almost has a large budget. Therefore several advertising networks make all the media channel resources about car together, and sell to advertisers to earn the price gap, such as AdChina. The blind advertising network is much simpler than the previous one. It just put all the media together, and sells to advertisers with a cheaper price. Both the purchase price and the investment on technological platform are less. Its features are wide target audiences and low CPM price so that this kind of network is quiet normal. Directional advertising network is also called the advertising network 2.0. It mainly adopts the specific targeting technology, especially for the content targeting or behavior targeting, such as the iFocus of hdtMEDIA. In order to match the suitable advertising, iFocus provides the content analysis towards websites based on purchasing the high quality media. It is much easier to classify the advertising trading platform. The normal one in China is the residual flow advertising trading platform and private trading platform. The difference between them is mainly focus on the flow source and controlling force of advertisers. Maybe several new advertising trading platforms will appear in the future.

The difference between them relates to their own industrial chain structure. The industrial chain of advertising network is clear, and refers that advertisers or agencies purchase the website resources through the advertising network. While the industrial chain of advertising trading platform is more complex. Advertisers or agencies purchase flow that is provided by the advertising displacement platform through DSP. The flow of advertising displacement platform always comes from the advertising network surplus flow or platform¡¯s website joining flow. Some other advertising inventory resource also comes from the SSP. There are so many platforms in this industrial chain. In that case, some companies provide products that cover several platforms, and achieve an integrated service.

I think the advertising network manages a little market, while advertising trading provides a huge market for doing the business freely. In the little market, the seller and buyer are clear. When the third part joins the business, it can be advertiser or agencies, advertising network and media. In the huge market, there is no limitation of seller and buyer. The business becomes freer. To some extent, the advertising network likes Carrefour. It purchases products around the country firstly, and let customers purchase them after classification. While the advertising trading likes Tmall. There are a large number of sellers and buyers. The same product has different prices. Someone also treat it as stock market. When you buy a stock with a price, and the stock trading platform will choose a seller that suits for this price, then the price will fluctuate along with market changes.

What is the value of advertising network and advertising trading after we know their differences?
Based on the research, the value of advertising network will be presented as follow:

Reducing the transaction cost: each advertising of advertiser could be signed a contract with websites if there is no advertising network. Meanwhile, it also needs to know each classification and value of each media. In that case, the cost is expensive absolutely. Therefore, the advertising network makes it easier, contact area is wider and cost is less.

Adding value function: the normal adding value functions of advertising network are controlling, frequency control, regional orientation and content orientation.

Audience targeting: it is not the final goal for advertisers to purchase the website resources, but the audiences behind those websites. The vertical advertising network classifies the relevant resources because it has the specific purchase function. For example, people who like to watch the car channel maybe interested in car.

Building a safe environment: in order to build a safe environment, the advertising network always chooses the high quality website when it purchases the media recourse. That is very important for a brand advertiser.

Volume and scale could be forecasted and controlled: advertising network tracks the website every day, and know its show inventory. In that case, advertisers can manage their flow, and easy for making plan and budget.

Meeting the current process of agencies: agencies always use the trading desk that supports workflow. Purchasing the advertising network resource has become one part of their workflow.

The advertising trading platform is a new technological platform, and its values could be presented as follow:

The huge storage balance: its source could be several advertising networks because of the low requirement of buyer. So it has a huge flow and wide target audiences.

A better purchase function: the advertising trading platform is doing a real-time bidding for each showing opportunity. It can provide some audiences¡¯ information to each showing opportunity, such as the website category and behavior nature. These could be the foundations for bidding, and achieve people targeting.

To Increase the efficiency and flexibility: advertisers can make an order through DSP. They do not need to do the brief report and price negotiation with advertising network Company. Parameters could be revised easily, so it is very efficient and flexible.

To increase the transparency: the advertising network gets profits from the price spread, and advertisers usually do not know how many it is. While the price of advertising trading platform will fluctuate along with the market changes, and the platform just gets the trading fee according to the proportion. Therefore, the price is much clearer.

To control the whole frequency: advertisers can achieve the frequency control in different advertising network with Cookie when they make advertising, and the previous method cannot do it.

Reduce duplication on the audiences: it helps to solve the crowd overlap issue among the several networks by using Cookie, so it can reduce cost as well.

It just lists several value points of advertising network platform and advertising trading platform. Other points are not mentioned at here now.

Coexistence or replacement
The definitions, differences and values of two platforms have already been discussed and compared. There is a popular question: whether the advertising network will be replaced by advertising trading platform, or whether they will be coexistence. Many western specialists believe that advertising trading will replace advertising network. However, I suggest that it is impossible for a long time. As the same reason, the online shopping like Tmall cannot replace the supermarket like Carrefour. The advertising trading platform is increasing, meanwhile the advertising network is updating as well. They are competitive and complementary. It is quite normal for advertising trading platform to occupy some flow of advertising network, that because the advertising trading is a fresh model with creative value. The cost of advertising trading will affect advertising network which is in the same field. Therefore, advertising trading will increases at the beginning. When the advertising network becomes more perfect, and adds several functions like real-time bidding connector and behavior targeting, those two platforms will be harmonious.

Another popular question: there are so many advertising trading platforms, whether they will mix together or not. The answer is yes, and several details have already existed. For example, the platform of Google maybe divided into two platforms, one is DSP and the other is displacement platform of supplier side. Those two platforms actually include a large number of advertising trading sub-platforms which is purchased by Google.

The existence of advertising trading platform is not accidental. It based on the increasing update of internet technology, cloud computing, large scale parallel computing and database technology. It is the combination of technology and traditional advertising industry. The revolution comes from technology. Therefore we can believe that the times of display advertising is coming.