What is an Ad Exchange and how it works?

Agencies, advertisers, ad middlemen, and publishers are purchasing more of their media through ad exchanges, but there is often confusion around what they are. Here are a few important things about Ad exchanges including how they work, and what they are utilized for:

What is an Ad Exchange?

An ad exchange is an online marketplace where advertisers and publishers come together for trading digital ad inventory like native, display, in-app, mobile, and video.  Purchasing and selling take place in real-time auctions, authorized by Real-Time Bidding (RTB) technology. The Ad Exchange uses a driven auction mechanism for mediating that does not serve either the purchaser or the seller side; it is an autonomous platform that enables programmatic ad buying.

Who makes use of Ad Exchange?

Owners of online magazines, websites, and blogs known as “publishers” use Supply-side platform (SSP) to fix into the Ad Exchange and make their online advertising space free for the buyers.

Ad agencies, Ad networks, and independent marketers are popularly known as “advertisers” who use Demand side platform (DSP) for connecting to an Ad Exchange and buy advertising space. Ad Networks also purchase ad space from Ad Exchanges, mark it and sell for a huge profit. Agency Trading Desk (ATD) makes use of the Ad Exchange to purchase huge advertising inventories and sell them wholesale to specific advertisers.

Benefits of Ad Exchange for Publishers and Advertisers

Programmatic ad buying continues through the utilization of algorithms and software, permitting publishers to receive the best value for their ad space and advertisers to reach out to their target audience in the right context and time.

Ad Exchange offers different control mechanisms for the publisher:

  • Setting minimum CPM’s for the inventory units; filtering and blocking the ads with sensitive ads or content from the competitors.
  • Explaining what different types of ads would appear on the web page by selecting ad style and ad formats.
  • Building customized combo of colours, fonts, and corner style and apply them to different display ads at a single point of time
  • Selecting the placing of ads on a web page

Sellers benefit from Ad Exchange with a capability to:

  1. Set the budget pacing options; select targeting options, bidding the capabilities, price settings, and behavioural profiling
  2. Blacklist a few websites and audiences
  3. Fix the number of times the same ads appear to the same user
  4. Retarget across several Ad Exchanges

So, have you ever thought about how Ad Exchanges work?

This technological platform that allows the purchasing and selling of digital inventories to use advanced technology, allowing billions of impressions to be purchased and sold in no time. The purchasing and selling procedure depends on bidding. Parties are permitted to fix the lowest and highest prices for every impression. Advertisers and publishers can also fix criteria for the kinds of impressions they want to purchase and sell.

Few impressions in an ad exchange may remain unsold. An ad may not get sold for several reasons. Both advertisers and publishers can set criteria for the ads that they want to purchase and sell, and at times this ends up keeping the ad space unsold in an exchange. For instance, as a publisher, you may want to show video ads on your website. This might limit the number of advertisers that are available for filling that space as some advertisers want to display video ads. On the contrary, a publisher may only get traffic from Venezuela. A seller in the U.S. may restrict the ads to just be filled by the publishers with U.S. based traffic. With all the possible combos of criteria set by the advertisers and publishers, you can find out why some impressions don’t get sold.

If a single ad network cannot match the impression with an ad, the impression can be passed to another ad network. The second ad network will go through all the similar steps as before. It will try to match the impression with the advertiser demand and sell that impression for a high price. If this another ad network is not able to sell the impression, it will go to other ad network and this cycle continues. If the advertising space remains unsold after going through various exchanges, it will become a residue ad. At this point in time, the ad is sold for a low price.

Impressions can be passed on when they are not sold, but it needs some technical knowledge for setting up. It is known as setting up of pass backs. If you do not set up the pass back correctly, the impression could remain unsold. If it is not sold, the impression goes waste. The ad space would not be filled, and you may not get any ad revenue from that impression.

Ad exchanges have streamlined the purchasing and selling of online advertisements. These exchanges permit most of the procedure to be automated, so sellers can purchase ads faster than ever before. It also signifies that there is a good chance your ad space will be paired with a seller who is willing to pay the most for it.

What are the various kinds of Ad Exchanges?

Open Ad Exchange/ Open Auction/ Public Marketplace is an open online marketplace with an extensive inventory from various publishers available for all the buyers. An Open Ad Exchange provides a wide list of publishers. However, sellers do not have detailed info about the publisher, as it is the same case with the private market. Sellers, looking for wide publicity select an open Ad Exchange. With over 70 billion impressions in a day flowing through open Ad Exchanges, there is a rising concern among the publishers and advertisers about online ad fraud, bot, and malware activity. For this reason, private markets are getting more and more popular as they are regarded as safer and transparent.

Private Marketplace/ Private Ad Exchange is a closed platform that helps the publisher to control which purchasers can make the bids, at what price, and in what conditions. Every private Ad Exchange is run by a private publisher that invites every single buyer personally to that platform. The publisher might provide permission to make certain deals with a few regular purchasers, advertising agency or a client. The seller might also block Ad Network and other third-party members from providing access to its various impressions. Private Ad Exchanges permit publishers and brands to fix direct relations with agencies and brands; therefore, negotiations with purchasers might be time-consuming when compared to Open Ad Exchange. The inventory which is available on private Ad Exchange is regarded “premium” comparatively, ordered in the open market.

Leave a Reply

Your email address will not be published. Required fields are marked *