Ad exchange
What is an Ad Exchange
Ad exchanges are an important resource in the digital advertising world. They serve as an online marketplace where ad impressions can be bought and sold instantly between advertisers and publishers. The price of ad impressions or ad space is determined by bidding from advertisers in real-time.
This dynamic marketplace enables advertisers to reach their target audience across multiple different websites and applications while providing publishers with the opportunity to maximize revenue by selling available ad space programmatically.
Ad exchange vs. ad network
Next, it’s important to distinguish the difference in meaning between an ad network and an ad exchange. Importantly, ad exchanges operate as transparent, decentralized platforms. They facilitate automated real-time auctions for ad impressions, providing an open and automated marketplace with a broad range of advertising inventory.
Ad networks, meanwhile, act as intermediaries connecting advertisers with publishers in a curated environment, managing direct relationships and transactions.
What’s more, rather than dynamically buying and selling ads based on remaining supply, the ad inventory traded on ad networks is predominately bought and sold in bulk.
| Ad network | Ad exchange | |
| Business interface | A company/organization | A software platform |
| Business model | Centralized | Decentralized |
| Pricing | Non-transparent, based on closed negotiations | Transparent, based on open bidding |
| Inventory | Premium, large supply of inventory | Remaining unsold inventory |
Interestingly, a historical link and overlap exist between these two different models. In fact, the evolution of ad exchanges arose as a result of the leftover ad inventory on ad networks.
While ad networks exploded in the late 90s and early 2000s to route ad orders between publishers and advertisers, publishers were often forced to sell any unsold inventory at a lower price. To tackle this problem, ad exchanges introduced an alternative platform for publishers to sell their remaining inventory to advertisers based on real-time bidding.
Related topics: Ad Network, ARPU, CPM, CPS, eCPM
