Ad Exchanges are digital marketplaces where publishers and advertisers come together to trade digital ad inventory such as display, native, video, mobile and in-app. Buying and selling happen in real-time auctions, empowered by RTB (real-time bidding) technology. The Ad Exchange is a driven auction mechanism for mediating that does not serve either the buyer or the seller side; it is an autonomous platform that facilitates and simplifies programmatic ad buying.
Owners of websites, online magazines or blogs known as “publishers” use SSP (supply-side platform) to plug into the Ad Exchange and make their digital advertising space available for buyers. Independent marketers, ad agencies and Ad Networks known as “advertisers” use DSP (demand-side platform) to connect to an Ad Exchange and purchase advertising space. Ad Networks also buy ad space from Ad Exchanges, mark it up and sell for profit. ATDs (Agency Trading Desk) use the Ad Exchange to buy large advertising inventories and sell wholesale to individual advertisers.
Programmatic ad buying proceeds via the use of software and algorithms, allowing publishers to get the best price for their ad space and advertisers to reach out target audience in the right time and context.
The internet user is not aware of the RTB process since auctions last not more than a few milliseconds, just about the time it takes a webpage to load. The process does not interfere with user experience and does not decrease page loading speed.
Open Ad Exchange/ Public Marketplace/ Open Auction is an open digital marketplace with extensive inventory from multiple publishers available for all buyers. An Open Ad Exchange offers a broad list of publishers;
However, buyers do not have the detailed information about the publisher, as it is the case with private marketplace. Buyers, looking for wider publicity choose an open Ad Exchange. With more than 70 billion impressions per day flowing through open Ad Exchanges, there is a growing concern among advertisers and publishers regarding digital ad fraud, malware and bot activity. For this reason, private marketplaces are getting more popular as they are considered safer and more transparent.
Private Ad Exchange/Private Marketplace (PMP) is a closed platform that enables the publisher to control which buyers can make bids, at what price and under what conditions. Each private Ad Exchange is run by an individual publisher that personally invites each buyer to the platform. The publisher might give permission to make deals with a few regular buyers, advertising client or an agency. The publisher might also block Ad Networks and other third-party members from giving access to its pool of impressions. Private Ad Exchanges allow brands and publishers to set up direct relationships with brands and agencies; hence, negotiations with buyers might be more time-consuming in comparison to Open Ad Exchanges. The inventory available on private Ad Exchanges is considered “premium” compared to that, ordered in open marketplaces.
Preferred Deals is an option for a publisher to sell digital ad inventory at a negotiated fixed price for preferred advertisers. Preferred Deals gives the publisher stable revenue stream through the controlled transaction system . Advertisers benefit from stable CPM prices and having access to premium, exclusive inventory.
Although the Ad Exchange and the Ad Network seem to be performing the same roles, these two platforms are two separate concepts and must not be confused.
Ad Networks collect digital ad inventory from a list of publisher sites or buy ad impressions in bulk from Ad Exchanges, sort them through and then resell them to advertisers. Since advertisers do not have enough time for filtering available inventory, Ad Networks do it for them. Ad Networks group inventory according to specific parameters such as audience segments (demographics, geography, language, interests, online behavior, etc.), pricing or scale. Some Ad Networks are focused on coverage and quantity, while others specialize in the quality of ad slots they offer.
Ad Exchange is an open pool of impressions whereas Ad network is a closed group of privately traded ads. Ad Exchanges offer more transparency to buyers since buyers can see exactly how much each impression is being sold for. While Ad Networks act as the intermediary and sometimes charge buyers with inflating prices.