An ad exchange is a digital marketplace that provides a technology platform for the publishers to sell their display, video and mobile ad inventory to advertisers through real-time auctions.
Ad Exchange vs Ad Network
Ad networks pull together bulk inventory from several publisher sources and sell them to advertisers at similar price for profit. On contrary, Ad exchanges are basically evolved ad networks wherein all the inventories are in open pool and advertisers can see exactly what each impression is worth for, thus providing transparency in transaction.
In order to do so, publishers quote a minimum price (aka floor price) for which they would want their inventory to be sold on ad exchange. They can also set what types of ads they will accept. When bidding occurs in real time, advertisers can see the floor price of each inventory and can decide what to buy that suits their need.
Open Exchange vs Private Exchange
Open Exchange means that all the inventories of publishers are open for all the buyers without any control. In open exchange transactions, publishers often do not know the type of ad that will be served on their site.
However, in order to exercise a greater control over who can buy their inventories and the type of ad being displayed on them, some publishers have started creating their own private exchange wherein, the publisher will offer only a handful of his premium inventories to premium advertisers. This doesn’t mean that the private exchange doesn’t incorporate automated bidding environment. The whole process is set similar to open exchange except that publishers can invite preferred advertisers.
Role of DSP and SSP in ad exchange
Advertisers connect to the ad exchange via DSP which with the information from DMP helps them realise the worth of each impression available to them in the exchange. The decisions are made in real time and the bidding generally occurs in milliseconds until another impression appears.
Publishers use Supply Side Platform SSPs to get connected to multiple exchanges to open their inventory to as many advertisers as possible in order to ensure that all of their inventories get sold and the open auction will result higher yield for them.
How an Ad Exchange Work?
Publisher’s ad inventory (impression) is automatically made available for advertisers to bid on the exchange through SSP as the user reaches on a page in the app or website.
Advertisers connect to an ad exchange via DSP to target audiences. The DSP then analyzes data from multiple sources to help advertisers decide the worth of impression for them, i.e. whether they would want to bid in the auction for the impression and if so, the value of bid to buy the impression.
Sometimes, different ad networks may also buy impressions on ad exchanges to mark them up later and resell them to advertisers present on their networks.