Ad Exchange
What is an ad exchange?
An ad exchange is an online marketplace where publishers and advertisers trade digital ad inventory. This can include video, display, mobile, and in-app ads. Most exchanges run on real-time bidding (RTB), where advertisers compete in auctions. The winning bid gets the right to show ads on the publisher’s site. Ad exchanges operate as independent platforms that support programmatic ad buying.
How does an ad exchange work?
Publishers connect to an ad exchange to sell available ad space. They can also share audience data such as demographics to help advertisers target more effectively. Publishers set floor prices and decide which buyers can access their inventory.
Advertisers connect either directly or through demand-side platforms. They define targeting, budgets, and campaign requirements. The exchange then notifies advertisers of available impressions, collects bids, and selects the highest bidder. The winning ad is delivered to the publisher’s page through the ad server.
Benefits of an ad exchange
For publishers
- Set minimum CPMs and block sensitive or competitor ads
- Control formats, styles, and ad placement on the page
- Apply custom design choices across multiple ad units
For advertisers
- Control budget pacing, bidding, and targeting options
- Blacklist audiences or websites
- Limit ad frequency per user
- Run retargeting across multiple exchanges
What happens during a bid request
When a user visits a site connected to an ad exchange, a bid request is created. The request includes user data such as location and browsing behavior. Advertisers then submit bids for the impression. The exchange selects the highest bid and serves the winning ad back to the publisher’s site.
Types of ad exchanges
Public marketplace
An open exchange where many publishers and advertisers trade inventory. Buyers get access to large volumes of impressions, but with limited detail about publishers. Open marketplaces move billions of impressions daily, though they carry higher risk of ad fraud.
Private marketplace
A closed exchange where publishers invite specific buyers. Publishers control pricing, terms, and which advertisers can participate. Deals often involve premium inventory and closer relationships between publishers and agencies.
Preferred deal
A direct agreement between publisher and advertiser at a fixed or negotiated price. Publishers gain reliable revenue, while advertisers get guaranteed access to premium inventory.
Ad exchange vs ad network
Both connect publishers and advertisers, but they operate differently.
- Ad networks collect inventory from multiple publishers, package it, and sell it to advertisers. They often filter or organize impressions by audience segment, price, or format.
Ad exchanges are open pools of impressions where buyers bid directly. They provide more transparency than networks, which act as middlemen and may charge higher prices.
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