What is an ad exchange?
An ad exchange is a digital marketplace where advertisers and publishers buy and sell advertising inventory in real-time bidding (RTB), typically through automated auctions. It acts as an intermediary platform that facilitates the trading of online ad space, connecting advertisers who want to place ads with publishers who have space to sell.
Ad exchanges are a key component of the programmatic advertising ecosystem, which uses automation and data to buy and sell ads efficiently.
Think of an ad exchange as a digital marketplace where advertisers, agencies, publishers, supply-side platforms (SSPs), and demand-side platforms (DSPs) can bid on advertising inventory from various publishers. Advertisers determine the price by participating in the bidding process.
How Ad Exchanges Work
Most ad exchanges function programmatically (or automatically), allowing companies to automate much of their advertising buys. Exchanges let ad networks and others directly purchase ad impressions, which occur whenever a user reaches a page on a website or app that is marked as ad space.
Advertisers can connect to exchanges using demand-side platforms (DSP) and utilize audience data to determine whether the space is relevant for their campaign. They can then purchase the space in real-time and bid on it instantly. These decisions can be made manually, or in many cases, automatically by algorithms that scan demographic and user data to find the best value for advertiser spend.
Ad Exchange vs. Ad Network
While ad networks and ad exchanges sound like the same thing, they are quite different. Ad networks aggregate inventory from a range of publishers while ad exchanges directly connect publishers and advertisers and enable buyers to see the exact price for impressions.
Types of Ad Exchanges
There are two major types of exchanges: open exchanges or private marketplaces (PMPs).
Open Ad Exchange
An open ad exchange is a marketplace that allows all sellers, buyers, ad networks, and advertisers to access the buying and selling of digital inventory.
Private Ad Exchange or Private Marketplace (PMP)
Private marketplaces (PMPs) still function via auction, but their client lists are restricted to referrals or invitation.
Popular examples of ad exchanges include:
- Google Ad Exchange (AdX)
- OpenX
- The Rubicon Project (now Magnite)
- AppNexus (now part of Xandr, which was acquired by Microsoft)