DMP vs DSP: Differences & Similarities Explained
by Cat Hausler
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The tech world, specifically the ad tech world, can feel like an excess of new words and tools that seem to pop up overnight. As you begin to explore the various terms of programmatic advertising, an ad exchange is something you’ll see mentioned often as an important part of the programmatic ad buying and selling process.
Keep reading to learn more about what is an ad exchange, how they work, who uses them, and the various types of exchanges.
An ad exchange is a digital marketplace that facilitates the buying and selling of advertising space in real-time through automated auctions. In other words, it acts as a marketplace that sits in between publishers looking to sell their inventory and advertisers looking to buy it.
An ad network aggregates ad inventory from multiple publishers and sells it to advertisers, often categorizing the inventory into specific segments based on content type, audience demographics, or other criteria. Ad networks traditionally played the role of a middleman by purchasing unsold inventory from publishers in bulk and packaging it for sale to advertisers, often adding a markup in the process.
While ad networks provide reach and simplify the ad buying process, they typically offer less transparency and direct control over placements compared to ad exchanges.
To recap, an ad exchange is a digital marketplace that streamlines the buying and selling of advertising space, primarily through real-time bidding (RTB) mechanisms. Here’s how it typically works:
This process enables efficient, automated, and transparent transactions between buyers and sellers in the digital advertising ecosystem, optimizing ad placements and pricing through real-time market dynamics.
For marketers and advertisers, leveraging ad exchanges brings several tangible benefits that enhance campaign performance, increase ad reach, and provide insightful data analytics.
There are various types of ad exchanges including:
An open ad exchange is perhaps what most refer to when discussing an ad exchange. An open ad exchange is exactly what it sounds like–an ad exchange that is open to anyone to access. Any advertiser, agency, or ad network has access to the inventory on the open exchange.
A private ad exchange is also just what it sounds like–an exchange that can only be accessed by specific advertisers. A publisher may want to limit who can access their inventory (and therefore, what advertisers show up within their content) so rather than post their inventory to an open ad exchange for anyone to access, they use a private ad exchange. A private ad exchange also prevents an ad network from reselling a publisher’s inventory.
A preferred deal is negotiated between a publisher and an advertiser. A fixed price, usually at a premium, is agreed upon so that an advertiser can get a first look at the inventory a publisher has available. If the advertiser does not want the inventory, it then moves to a real-time auction. This is also often called programmatic non-guaranteed because the inventory isn’t reserved for the buyer and they don’t need to buy the inventory once they see it.
So who exactly buys from advertising exchanges?
An ad exchange is meant to make advertising available to anyone who is looking to advertise. Most commonly, advertisers will buy directly from an ad exchange or an agency will buy from the exchange on behalf of their clients. While less common, an ad network may also buy directly from an ad exchange.
Now that you know what an ad exchange is conceptually, what about some real-life examples?
Some popular ad exchanges are:
This is a great question because the naming here doesn’t make this one easy. There are two different Google entities you may be hearing about: Google Ads and Google Ad Exchange.
Google Ads is a paid search platform–not an ad exchange.
This service sells paid ads at the top of search results or within the Google Maps function. Advertisers can buy keywords relevant to their business and these ads appear when a user searches for those terms.
Google Ad Exchange, which is often referred to as Google AdX, is an ad exchange and one of the most popular.
Programmatic ad exchanges make their money in a few ways.
First, they often require a setup fee to be paid at the outset of using the exchange.
Second, and perhaps the most common way an ad exchange makes money, is off a commission. A publisher pays a percentage of the money that they make from an advertiser back to the ad exchange since the exchange was what helped make the connection and ultimately the sale. The cost doesn’t always fall to the publisher. Advertisers may be the ones responsible for the commission, depending on the ad exchange and the negotiated deal.
How does Performance TV compare to an ad exchange? Well, Performance TV, a form of OTT advertising, plays a different role in the ad ecosystem and actually works with ad exchanges along the programmatic process.
That said, unlike an ad exchange, Connected TV platforms like MNTN offer both quality impressions and transparent reporting.
An ad exchange is a connection between the publisher looking to sell impressions and an advertiser looking to buy impressions. While advertising exchanges were originally created to make it easier and more mutually beneficial to exchange ad impressions, there are safer and more transparent options for CTV/OTT advertisers to explore.
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