An ad exchange is a marketplace where publishers sell advertising space to advertisers. It works as a real-time auction:
- publishers provide information about advertising space: URL, audience, topics
- a user enters the publisher’s website
- information about the user is shared with the ad network: their previous behavior, interests, searches, etc.
- ad network sends information about publishers and users to the network and the system decides whether it is an interesting space for the advertiser
- advertisers who are interested offer the bid. The ones who offer the biggest one win and can display the ad
However, this process takes less than a second and is performed by machines. Advertisers set bids in advance and have to set realistic spendings to have a chance to appear on the websites.
Except for the bid, advertisers can also set targeting options, frequency capping, retargeting options, and sites they do not want to appear on.
There are open and private ad exchanges. Open ones are free to enter for all publishers and advertisers. Private ones are run by individual publishers so that they can decide who can put ads on their website and create deeper bonds with the brands.
