Term
Ad Exchange
noun
An ad exchange is an online marketplace where advertisers and publishers trade digital ad inventory.
What Is an Ad Exchange?
An ad exchange is an online marketplace where advertisers and publishers trade digital ad inventory. These could include video, display, mobile, and in-app ads. RTB (real-time bidding) technology powers the auctions that determine which advertisers have the rights to the ad inventory. The exchange then publishes the inventory to the auction winners for publishers. Ad exchanges are autonomous platforms that facilitate programmatic ad purchasing.
How Does an Ad Exchange Work?
A publisher gets in touch with ad exchange directly by using platforms or ad networks. Mostly, publishers connect with good bidders and also sell their unsold inventory. In order to get a profit, publishers allow targeting by giving their users demographic information with an exchange. The exchange stores this information, including criteria, and decides floor price to allow publishers to find relevant buyers.
Just like publishers, advertisers also connect with exchanges either directly or through demand-side platforms. Advertisers set their target audience and set up the campaigns. Exchanges also contain campaign requirements, tell advertisers when an ad opportunity is available and ask them to bid.
What Are the Benefits of an Ad Exchange?
Publishers and advertisers using an ad exchange get access to programmed ad buying with the help of software and algorithms. Getting the best price for their ad space and being able to reach the target audience at the right time are some of the key advantages of an ad exchange.
Benefits for Publishers
- Set the minimum CPMs for inventory units, blocking and filtering ads containing sensitive content, or controlling competitors’ ads.
- Decide what type of ads will appear on the page by picking styles and different formats.
- Choose the location of an ad on a page.
- Build a custom mix of colors, fonts, and corner styles and implement them to multiple ads at the same time.
Benefits for Advertisers
- Having the ease in setting budget pacing options, targeting options, bidding chances, price settings, etc.
- Blacklist some audiences or websites
- Putting a limit on how many times a person can see an ad
- Retarget on multiple ad exchanges
What to Do After Receiving a Big Request From an Ad Exchange?
When a user visits a website that works through an ad exchange, they trigger a bid request. With the bid request, the ad exchange also receives user data like location and browsing history. Then the ad exchange sends this bid request to advertisers, who then bid on the inventory.
The ad exchange collects all the bids after this and chooses the highest bid as the winner. Then it returns a signal to the publisher website and puts the winning ad after getting it from the partner ad server.
Types of Ad Exchanges
Public Marketplace
The public marketplace is an open digital marketplace with many options from multiple publishers available for buyers. However, buyers do not have detailed information on the publishers, though a broad list of them is available. Buyers who are looking for a wider pool of options choose an open marketplace. Almost 70 billion impressions flow through open marketplaces every day, so there is also rising concern about digital ad fraud. For this reason alone, private marketplaces are becoming more popular because they offer more transparency, credibility, and security in transactions.
Private Marketplace
It is a closed marketplace that gives control to a publisher on which buyers can bid, for what price, and under what conditions. An individual publisher runs each private exchange and personally invites buyers to their platform. The publisher can make deals with few buyers or an advertising agency. The publisher can also block ad networks or third-party users from giving access to their impressions. Private marketplaces give a chance to brands to develop a relationship with agencies, so the negotiations also take longer to conclude. You can call the inventory ‘premium’ on such marketplaces.
Preferred Deal
A preferred deal is an option for the publisher to sell their digital ad inventory to selected buyers at a fixed or negotiated price. Preferred deals give publishers a stable stream of revenue through controlled transactions. Advertisers also benefit from stable transactions and having access to premium inventory.
Differences Between Ad Exchange and Ad Network
Although both perform the same roles, an ad exchange and ad network are two separate concepts. Ad networks collect inventory from a list of publishers, or they buy ad impressions in bulk from ad exchanges, sort and resell them to advertisers. Many advertisers do not have time to filter available inventory; ad networks do it for them.
Ad Networks gather inventory according to particular parameters like audience segments, price, or scale. Some ad networks pay attention to coverage and quantity, while others specialize in the ad slots they offer.
Ad Exchange is a pool of impressions, while an ad network is a closed collection of private ads. Ad exchanges offer more transparency to buyers, while ad networks act as the middleman and sometimes charge high prices.