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How does ad exchange work

Advertising exchanges are special marketplaces, which are created for the cooperation of advertisers and publishers. They allow making a trading process easier and much faster. Read about the benefits and key features of an advert exchange.

What is an ad exchange?

Any advert exchange is a digital marketplace, where users can sell and purchase the advert space. It is a third-party platform, which organizes online auctions for publishers and advertisers. The auctions are usually carried out in real time, while advertisers can make bids on the offers, which correspond to their requirements.


All advert exchanges have the same principles of work. The process presupposes the combination of several platforms:


  • Supply-side platform. This type of platform is created for publishers. With the help of it, they can control their advert inventory and make it available to advertisers. Among publishers, there might be online magazines, blogs, owners of various websites, etc.


  • Demand-side platform. This variation of a platform is organized for advertisers. By means of it, they are able to join advert exchanges and purchase ad inventory offered by publishers. Among advertisers, there are advertising agencies, independent marketers, advertising networks, etc.


Each of the platforms works on its own server in order to make the experience of both sides comfortable.


As for advert exchanges, there are 2 main kinds of them:


  • open


  • private.


The first type is available to everyone, while the second one offers to become a member only by invitation. Private ad exchanges have stronger requirements and are considered more reliable.

Advantages of advert exchanges

The application of advert exchanges possesses plenty of benefits for both advertisers and publishers. Using AE, every publisher can enjoy very useful control mechanisms, which are as follows:


  • the opportunity to select a minimal CPM (thus, there are no risks to sell at too low prices)


  • the options to block inappropriate content or materials from the competitors


  • selection of preferable advert styles and formats


  • selection of preferable locations of the adverts on the pages of a website


  • the opportunity to select colors, fonts, and other features to apply to several adverts.


Consider the important advantages offered by advert exchanges to advertisers:


  • the possibility to adjust budget options (which include various targeting features, pricing settings, bidding options, behavioral profiling, etc.)


  • the chance to avoid placing the adverts on inappropriate resources (there is a blacklisting option to ignore such sites)


  • great opportunities for retargeting (using several advert exchanges)


  • the possibility to limit the number of times a definite advert is displayed on a website.


As for the general advantages, we can also mention minimal human involvement. Thus, there are low risks of errors or fraud. The system is automated as it is based on the programmatic approach, so it is transparent. Besides, such platforms allow saving lots of time and money avoiding long negotiations, meetings organization, etc.

Principles of functioning

The way every advert exchange works is not too complicated. Consider several steps of its functioning:


  1. By means of SSP, a publisher makes his/her ad space available on the advert exchange (the whole information concerning the inventory is always provided including location, URL, categories, audience type, etc.)


  2. The information about the site’s users is collected by the advert exchange (when a visitor opens a page/app, an advert impression appears on the auction)


  3. A bid request is sent to DSPs to estimate the conditions of a deal and any related information


  4. DSPs decide if the information obtained is appropriate to an advertiser


  5. If it is acceptable, the maximum bid is sent by DSP to an advert exchange (together with the advert copy)


  6. An advert exchange inspects a bid and select advertisers, who meet the requirements


  7. An advert exchange collects all the data and automatically selects the best bidder


  8. The advert of the winner appears on the publisher’s site.


The whole process takes a few fractions of a second because it is fulfilled with the help of special software working on computerized algorithms.

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