Programmatic Blog

What is Ad Exchange

Publishers partner with supply-side platforms to manage their inventory and get the best value for their ad units. Similarly, advertisers partner with demand-side platforms to help them find the right target audience and run a successful campaign. But have you ever wondered who connects these two platforms? The answer is ad exchanges.

Ad exchange, as a crossroad, connects thousands of publishers and advertisers. It provides a platform to sell and buy ad inventories using its connections with various demand-side platforms and supply-side platforms. During real-time bidding , publishers look for the highest bidder and advertisers want the best impressions to make their ad campaign successful. And this is made possible by exchanges.

How does Ad Exchange work?

A publisher makes its inventory available on the Ad Exchange through SSP. The publisher provides full details on the inventory such as page location, URL, audience, topics and so forth.

When the user enters the publisher’s website or mobile app, an ad impression automatically appears on the auction. The data about the user is collected, sent to the publisher’s server and then transferred to the Ad Exchange.

Then, the Ad Exchange sends a bid request to DSPs and Ad Networks. Each DSP would inspect the bid request and all information related to it (demographics, user ID, geolocation, frequency capping, day parting, and other targeting options). After inspection, the platform would decide whether the impression is of interest to the advertiser. If so, DSP would send a reply to the Ad Exchange with a maximum bid amount and the location of the advertising copy that is to be placed onto the available ad space.

The Ad Exchange reviews advertisers who bid on the impression. The Ad Exchange eliminates the advertisers who do not meet the publisher's requirements. For instance, the ad slot is available on the Chinese website and a publisher sets a restriction to allow Chinese-language ads only. Therefore, the Ad Exchange would eliminate all non-Chinese ads from the auction.

Having gathered all data, Ad Exchange analyzes bids and sells the impression to the highest bidder.

The winning advertising copy appears on the publisher website in front of the user. The internet user is not aware of the RTB process since auctions last less 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.

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