Ad Exchange Platform: Breaking down complex technology

We have talked a lot about how to monetize a website through selling ad inventory (you can check out some recent posts here and here to learn more). Now let’s dive deeper into an ad exchange platform. This technology helps to easily facilitate selling and purchasing advertising inventory.

What is an Ad Exchange Platform?

An ad exchange platform is a digital marketplace that enables advertisers, ad networks, and publishers to buy and sell advertising space, often through real-time auctions. Seems simple enough. So let’s take a closer look at how they work.

Complex Technology Stack

There are several pieces of technology that plug into an ad exchange platform to power the ecosystem. This can get very complex. We’ll focus on two important pieces in this post. Publishers post their available inventory to supply-side platforms (SSP). Advertisers can bid on available inventory through demand-side platforms (DSP). An ad exchange platform connects the supply and demand pipes to facilitate the advertising buying and selling economy.

Pricing and Bidding

Prices for advertising inventory are determined through bidding. Publishers set a “floor” or minimum bid in their SSP, as well as rules around what types of ads they will accept. Buyers then bid for varying types of inventory available in their DSP.

Ad Serving

The moment a user lands on a website or in an app, an ad impression on the page can come up for auction on an ad exchange platform. A buyer’s DSP can instantaneously analyze data from multiple sources. These could be a user’s cookies or mobile identifier, second-party data from the publisher, demographic and purchasing behavior from third-party data vendors, or a buyer’s own first-party data. When compiled, this information determines whether to bid on the ad impression and how much to bid. If the buyer wins the auction, their ad is displayed on the website through an ad server. Ad servers are also connected to the ad exchange platform. All this happens in fractions of a second where the website visitor is none the wiser.

This approach is fully technology-driven as opposed to the historical approach of negotiating price on advertising inventory directly with a publisher or ad network. The ad exchange platform system, therefore, creates a rational marketplace and automates the tedious buying process.

Vendors in the Space

There are many ad exchange platforms, but some of the big players in the space worth looking into are:

More and more companies operate what are essentially ad exchange platform-SSP hybrids. And going a step further, there are now a growing number of companies that offer a “full stack” of ad tech with products included for sellers to auction impressions and buyers to bid on those impressions. Rubicon Project, DoubleClick and ONE by AOL are among the examples of companies that offer products for both parties.

And new to the exchange ecosystem is an audience sharing tool such as Offsite. Offsite is a platform that creates a marketplace for publishers to share their website audience with advertisers, but keep their privacy and approve who utilizes this data. Advertising buyers are able to leverage valuable 1st-party data directly from a publisher and run targeted advertising through the Google Ad Network, a win-win for both parties.

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