A lot of people have no idea what an ad exchange is and how it actually works. Now we will try to make it clear.
What is an ad exchange?
An ad exchange definition is complicated, but in a few words it is a special platform. Ad exchange platforms were invented in order to help advertisers sell and buy products. It looks like online market where all the types of advertisements are displayed.
How does it work?
An advertisement exchange gives publishers an opportunity to suggest inventory online (it is done on a Supply Side Platform). It usually concerns residue inventory which haven’t been sold in sales department. Special Demand Side Platform (DSPs ad exchange) let everyone choose the items they want to purchase. Advertising inventory is sold and bought according to real-time bidding (in other words, RTB ad exchange).
What kinds of exchanges exist?
We can divide all online ad exchanges into 2 big groups. Let’s look at each type in detail.
1. Private Ad Marketplaces
This type represents a RTB bargain by invitation only. It means that one or several publishers have a right to invite a certain amount of potential buyers. The aim is to bid on suggested inventory.
But advertisers/buyers want to select the place for their ads to show up. Thus, the offers presented on the private trading platform are believed to be more qualitative in comparison to inventory presented on the open type.
2. Open Ad Exchanges
The main feature of any open ad exchange is the ability for everyone to bet on the resources available. The prices of impressions are also known, which makes inventory presented on the exchange clear and understandable in comparison to the advertising network (in these cases people pool resources from various publishers, then mark them up to make their selling beneficial). In addition to this, some other problems exist. For example, the percentage of fraud that is constantly growing. It is the reason for growing popularity of private markets and exchanges.
Why advertisement exchange is so popular?
The main advantage of advertising exchanges is powerful: advertisers purchase inventory from different publisher groups easily, without negotiating direct purchases with separate publishers. All they need to for getting a lot of inventory is to plug in. Publishers, in turn, benefit from the exchange of advertisements, because they can receive income from resources that they did not sell directly through the sales department.