What is an Ad Exchange?

20th April 2020

What exactly is an “Ad Exchange”?

An ad exchange is almost exactly what it sounds like; it’s a digital marketplace that lets advertisers and publishers (websites) to buy and sell ad space directly to each other in real-time through what we call auctions. So, picture the Wall Street stock exchanges but set it in a digital landscape and instead of trading stocks and shares we’re trading ad space across websites, apps, audio devices and Smart TV’s.

The way ad exchanges work is based on micro “conversations” that happen in a fraction of a millisecond between an “advertiser” (the buyer) and a “publisher” (the seller – such as a news or entertainment website). The “buyer” says that it wants to buy some ad space for a certain price (but so do a lot of other buyers), the publisher/seller then says “I have this space available for this price”. The buyers then enter an auction and the top bidder wins and appears within the ad space that was for sale. All of this happens within the time it takes the website you’re browsing to load it’s page.

There are many ad exchanges out there, which ads an extra layer of complication to the process. So now picture yourself walking down a very crowded market place street and everyone is trying to sell you something as you walk down, you find the item you were looking for in three or four different shops close together, which one do you go for? Well the best quality and best value for money comparative to your budget of course.

There is no difference in this example to how ad exchanges work in conjunction with each other. Each exchange wants to sell as much of their “stock” or inventory as possible, but they also want to make a profit. Each seller wants to buy the product they’re looking for, but they want it to be good quality, and they don’t want to pay too much money for it. This is the basis of the relationship between advertisers and ad exchanges.

We have a DSP (demand side platform) which is sort of like a broker or sales rep who not only looks for the inventory for you but also looks at finding the best price based on your budget (sort of like a personal shopper-accountant hybrid). Our DSP allows us to help achieve the best inventory relevant to your campaign on the most appropriate sites while also ensuring you’re not paying too much for that inventory and making savings where possible to redistribute into your campaign.

Feeling a bit confused? We would be surprised if you weren’t! But that’s okay, because our programmatic team handles all of the complicated technical side out of it for you and executes the above process on your behalf. Using our in-house DSP we not only have 100% clarity on where your advertising budget is being spent, but have taken back control over where your adverts are placed. These are two key points not available with many other ad networks.

We have a DSP in-house, but the DSP we use is also an ad exchange itself. This means we’re able to see both sides of the coin thus guaranteeing a seamless and effective solution. An ad network and  ad exchange work in conjunction with each other (think of the personal shopper/broker character mentioned earlier as the ad network and then remember what we have outlined above about the ad exchange being a busy marketplace) – however, you need to ensure that the relationship between the two is strong otherwise the inventory you buy will be based on what’s best for the “broker” NOT what’s best for your campaign.

We’re in the unique position of having an ad network-ad exchange hybrid in-house meaning our ad inventory is cheaper, more effective, quicker to obtain and of higher quality than going through another ad network who would then have to source inventory through their preferred ad exchanges. The Golley Slater Trading desk has (most importantly) the freedom to pick and choose what ad exchanges and ad networks we want to buy inventory from which means a better solution for our clients based exclusively on their needs above any other factor.

Jake Mussa

Programmatic Trading Manager

The original article can be found at https://www.golleyslater.com/what-is-an-ad-exchange/