Ad Exchange in Native Advertising
An ad exchange is a platform that acts like a digital marketplace for ad inventory. It allows advertisers to purchase ad inventory directly from publishers, usually using automated and programmatic auction systems such as RTB (real-time bidding).
Ad exchanges are yet another industry response to the growing problems of matching ad inventory with ad buyers.
In the early days of Internet advertising, publishers and advertisers had to find each other and directly negotiate in order to put ads in the right place and monetize publisher’s traffic.
This solution lacked any cost optimization options, not to mention serious organizational problems given the need to strike many deals between various unknown parties before any ad could be displayed. Hence ad networks were born.
Ad networks introduced themselves as intermediaries that will connect advertisers and publishers in the most effective way. What they wanted in return was a commission from ad sales.
Ad networks were doing the heavy-lifting with packaging ad inventory into batches based on demographic, vertical or other criteria. This scenario was working and still works for many.
The downside of this scenario was unclear pricing and a lot of unsold inventory. This is where ad exchanges came in.
How Do Ad Exchanges Work?
Ad exchanges are services where publishers and advertisers can meet directly and trade ad inventory.
Ad exchanges offer limited assistance for their buyers or sellers, as they do not repackage ad inventory themselves.
This gives all parties involved a clearer picture into pricing and volumes. Ad exchanges have adopted a different business model and they do not put high commissions on the ad sales. There may be small commissions or setup fees.
Publishers and advertisers are free to trade directly with each other or through the assistance of Demand-Side Platforms (DSP) or Supply-Side Platforms (SSP).
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Difference between Supply-Side Platform, Demand-Side Platform, Ad Network and Ad Exchange
A Supply-Side Platform, or SSP, is a digital platform for publishers that allows them to gather and manage their inventory to be sold to advertisers. To put it short: SSPs accumulate ad inventory and trade it on other platforms, such as ad exchanges. Read More.
A Demand-Side Platform does the same thing but for the other part of the equation. They group advertisers and allow them to purchase ad inventory from many ad exchanges.Ad networks offer a similar service to ad exchanges but it is more assisted. The best explanation of the difference between ad networks and ad exchanges is that ad networks are brokers that trade on the stock market and ad exchanges are the stock market. Read More.
Who buys from Ad Exchanges?
There may be many parties involved in the buying process on ad exchanges. There may be direct advertisers or whole agencies, and DSPs that buy traffic on behalf of their advertisers. All of them use a programmatic auction system to buy exactly as much inventory as needed either for themselves or for resale.
Who can access Ad Exchanges?
Ad exchanges, unlike affiliate networks, usually do not employ any special vetting process. Thus making their inventory accessible for everyone with a valid payment method.