here seems to be a lot of confusion surrounding what an ad exchange really is. In this post, we’ll briefly cover what ad exchanges are and how they work.
So what exactly is an ad exchange?
An ad exchange is a technology platform that makes it easy for advertisers and publishers to buy and sell ad inventory, often through real-time auction. It’s a digital marketplace where you can find almost any type of ad format, such as display, native and video ads—both for desktop and mobile.
How do ad exchanges actually work?
Publishers make their inventory available on an ad exchange for advertisers to bid on using a Supply Side Platform. These are usually remnant inventory—or the portion of inventory not sold directly through their sales team.
Advertisers and agencies can then pick and choose which ad impressions they want to buy, with the help of Demand Side Platforms. The buying and selling of ad inventory are done one impression at a time through real-time bidding (RTB).
Types of Ad Exchanges
There are two types of ad exchange: 1) Open Exchange, and 2) Private Marketplace.
In an Open Exchange, any buyer can bid on the available inventory. The market price of each impression is also known, making the inventory in an exchange more transparent than say an ad network, where they aggregate inventory from a range of publishers, mark it up and sell for profit.
Although there is one main concern for both publisher and advertisers surrounding open exchanges, and that is the level of fraud. This growing concern has fuelled the growth of private exchanges or private marketplaces.
A private marketplace is an invitation-only RTB auction; one publisher or a number of publishers can invite a select number of buyers to bid on its inventory. Advertisers and agencies, on the other hand, can be more selective when it comes to where their ads appear. The inventory available in a private marketplace is therefore considered to be higher quality than what is available on an open exchange.
So what makes ad exchanges so special?
Advertisers love ad exchanges because they can easily buy ads from different publishers and websites, instead of negotiation direct buys with individual publishers. Advertisers only have to plug in once to get access to a large amount of inventory.
Publishers, on the other hand, benefit from ad exchange because they can earn revenue from the inventory they haven’t sold directly through their sales team.