What Is An Ad Exchange?

by | Mar 17, 2021

An Ad Exchange is a digital marketplace where advertising inventories are bought and sold

In an Ad exchange, trades of digital inventories are made between publishers and advertisers. These buying and selling are empowered by real-time bidding (RTB).

Advertisers and marketers use Ad exchange to find popular magazines, websites, and other publishing platforms to post their ads and reach their target audience. Publishers use the marketplace to manage and control their ad inventories. They set the price and define what types of ads can appear on their site. This programmatic ad buying is facilitated by a unified interface called the DSP and SSP.

Publishers use the Supply Side Platform (SSP) to manage their inventories and make them available for purchase. On the other side, the Demand Side Platform (DSP) is used by advertisers to find and buy ad spaces.

There are three types of Ad exchanges: Open Ad exchange, Private Ad exchange, and Preferred deals.

In an Open Ad exchange, there are extensive lists of inventories from a wide range of publishers. In contrast to a private Ad exchange, inventories are available for all buyers. Moreover, in this public digital marketplace, the details of publishers are not made available to buyers. This means that advertisers cannot know for sure where their ads will show up and what type of reach they can get. Another downside is that Ad frauds and other malicious activities may also occur in this type of Ad exchange due to its open-to-all system.

Private Ad exchanges are only available to some advertisers. Individual publishers run it and invite buyers, set the conditions and controls which buyers can make the bid. As a result, ad spots in private Ad exchanges are better in quality. Furthermore, private Ad exchanges are more secure than public ones. The only downside is that negotiations can be time-consuming due to the direct nature of the Ad buying process.

In a Preferred deal, publishers sell their spaces at a negotiated fixed price for their preferred buyers instead of operating on a bidding system.  Here, advertisers can benefit from having access to premium Ad spots while receiving stable Cost per Mille (CPM) prices. For publishers, preferred deals give them a steady income.

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