Ad Exchange

Everything You Need to Know About How Ad Exchanges Work

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An ad exchange is an online marketplace for advertisers to buy and sell inventory, often through real-time auctions. Publishers designate inventory, buyers can access and buy it through bidding platforms, such as DSPs (demand-side platforms).

As more and more marketing moves toward buying audiences to drive efficiencies rather than buying against specific media content, ad exchanges have grown more important. Ad exchanges differ from ad networks in that they let buyers see exactly what price inventory is selling at by aggregating impressions available. Ad networks pull together inventory from several publisher sources, then sell it for a profit.

The idea is that an ad exchange creates a rational marketplace and automates the tedious buying process, allowing publishers to set a "floor" or minimum bid, as well as rules around what types of ads they will accept. Buyers then bid for varying types of inventory available but rarely know in advance where those ads will show up. Sellers also often don't know who is buying their inventory.

In pure exchanges, inventory is "blinded." Publishers will "blind" their inventory to avoid channel conflict, or the problem of inventory being sold through both automated and live salespeople.

Some publishers, like Conde Nast and The Weather Channel, have created their own private exchanges or networks of sites that feed into an exchange. Somewhat confusingly, many ad networks now buy inventory from ad exchanges. Companies in the ad exchange space include AppNexus, Facebook Exchange, Google's AdX, OpenX and The Rubicon Project, Yahoo's Right Media.

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