What is an Ad Exchange? (+3 Types of Ad Exchanges)
If you’re looking for a way to more effectively reach your target audience, you may have considered pay-per-click (PPC) ads for your business. PPC ads are a great addition to your existing marketing campaign and can help you reach valuable leads.
As you learn more about PPC ads, you’ll discover an option called Ad Exchange.
So, what is an Ad Exchange? How can your business use Ad Exchange to reach more leads?
On this page, we’ll dive into what an Ad Exchange is and the different format options, how ad networks differ, and whether you should use ad exchange.
What is an Ad Exchange?
If you’ve never heard of the term, your first question is likely “what is an Ad Exchange?”
Ad Exchanges are digital marketplaces where publishers can sell ad space to advertisers. This marketplace allows companies to offer display, native, video, mobile, and in-app advertising options.
Let’s look at the step-by-step process of using an ad exchange:
1. Publishers put up their advertising spots
Publishers make their inventory available through an Ad Exchange. In this Exchange, they can offer advertising spots on different parts of their website. Advertisers can bid on these placements.
2. Advertisers bid on ad space
The buying and selling happen in real-time auctions. Ad Exchanges use real-time bidding technology to organize and select bids. This program easily facilitates the ad buying process for publishers and advertisers.
3. Program determines if advertisers qualify
For an advertiser to be in the running for the spot, they must meet the publisher’s requirements for the position. The Ad Exchange will analyze all bids for the position and sell the place to the highest bidder that meets the publisher’s requirements.
4. The advertiser’s ad goes up
This process takes milliseconds to happen. In the time a publisher’s website loads for the user, the auction happens, and the ad gets chosen to appear on the page. It does not decrease load time or interfere with the user experience because it occurs so quickly.
Who uses an Ad Exchange?
As you look more into what an Ad Exchange is, you may wonder who uses Ad Exchanges. Virtually anyone can participate in an Ad Exchange. Whether you want to sell advertising space or buy advertising space, you can use this process.
Typically, website owners, online magazines, and blogs will use the Ad Exchange as publishers. These sites, magazines, and blogs drive an abundance of diverse traffic, which appeals to companies looking to reach people in their target audience.
Marketers and advertisers typically buy space. These companies want to reach as many people in their target audience as possible, so capturing ad space on popular magazines and blogs helps them gain exposure.
There are also ad networks that buy advertising space from the ad exchange. We’ll dive into the ad network vs. ad exchange segment later.
Why do people use an Ad Exchange?
Ad exchanges benefit both the publisher and the advertiser. The publisher gets the best price for their ad space, while the advertiser can advertise on a platform that allows them to reach their target audience at the right time and in the proper context.
Types of Ad Exchanges
As you learn more about Ad Exchange, you’ll find there are different types of exchanges. Let’s take a look at the three types of Ad Exchanges available to your business.
Open Ad Exchange
An open Ad Exchange is a public digital marketplace where advertisers can bid on ad space. There is an extensive inventory from publishers that buyers can snatch up to showcase their ads.
In the open Ad Exchange, advertisers don’t get all the detailed information about the publisher or the advertising spot. The information is vague, which makes it challenging to know where your ad placement will be and what type of reach you can get with it.
The open Ad Exchange is also susceptible to misuse. Digital ad fraud, malware, and bot activity plague open Ad Exchanges. Since these Exchanges are free to everyone, it’s difficult to combat this malicious activity.
Private Ad Exchanges
Private Ad Exchanges are more secure than Open Ad Exchanges. This Exchange is a closed platform that enables the publisher to control who can bid on their advertising spots.
Publishers determine which buyers can make bids, how much they can bid, and the conditions. It’s a more appealing avenue for publishers because they can control their Ad Exchange.
The individual publisher runs each private Ad Exchange. They invite each buyer to their platform to bid for advertising space.
It allows publishers to permit to make deals with companies they know or like. These websites can let regular buyers or advertising clients/agencies get in on bidding for their advertising space. It allows the publisher to have more control over who can bid for advertising on their website.
When a publisher sets up their auction, they can block Ad Networks from buying their space. They also prevent third-party members from giving access to bots and other malicious bidders.
The only downfall of private Ad Exchanges is that negotiations with buyers can take longer. Since publishers consider these spots “premium,” it can take a bit longer to negotiate. The process is well worth it, however, because you can get quality ad spots through these auctions.
Preferred deals give publishers the option to sell their digital ad inventory at a negotiated fixed price for preferred advertisers. If a publisher has strong relationships with specific companies, they can offer the advertiser a set amount to market on their page.
This option benefits the publisher because they have stable revenue. They can set up a controlled transaction system where they know how much they’re going to receive from offering the ad to an advertiser. It prevents the publisher from operating on a bidding system.
Preferred deals benefit the advertiser because they have a stable cost per thousand (CPM). The advertiser knows how much they’ll pay for impressions.
Ad Network vs. Ad Exchange
As you learn more about how to start an Ad Exchange, you must know the difference between Ad Networks and Ad Exchanges. You’ll see these two terms used often, so it’s essential to understand the difference.
Ad Networks go into an Ad Exchange and buy advertising spots to resell them. They sort through these spots, mark up the prices and sell them to advertisers for a profit.
Many publishers sell their inventory to Ad Networks that don’t get sold to advertisers. It’s a way for them to sell non-premium inventory and still make a profit.
With Ad Networks, you often don’t get the full details of the ad spots.
When you don’t know the full details of the ad spot, you’re taking more of a risk on whether your ad will be effective. You want to get prime positioning on a website so that leads will see your business’s ad. With Ad Networks, you risk paying more for a spot that may not be so great for your business.
Ad Exchanges are the source for bidding on ad space for a company’s website. The Ad Exchange is where companies buy their advertising spots.
With an Ad Exchange, you’ll get more transparency. In a private Ad Exchange, you can see all the details of your advertising spot.
Should I use Ad Exchange?
If you’re looking to run more display ads, Ad Exchanges are a great place to get you started. You can connect with well-established websites and help your brand gain more exposure.
Ad Exchanges help you reach people that haven’t found your business or website yet. It gives you the option to bid an amount that works best for your business. It’s a great way to help you gain exposure while sticking within your budget.
Start using Ad Exchanges today
Ad Exchanges are an excellent place for you to start using display ads to grow your business. These Exchanges will help you get premium real estate on popular websites so you can start driving more brand exposure and traffic for your business.
If you need help getting started with paid advertising, our team of over 200 experts can help. Give us a call today at 888-601-5359 or contact us online to speak with a strategist about our paid advertising services!