Unraveling the Role of Ad Exchanges in Programmatic Buying

Search the web for “what is an ad exchange” or “programmatic buying” and you will find several search engine results pages (SERPs) that touch on the role of ad exchanges.  Ad exchanges sound complex yet they are nothing to be intimidated by.  

Ad exchanges are web-based marketplaces where businesses, advertisers, publishers, agencies and other parties place bids on ad spaces.  Such bids are placed with real-time bidding referred to as RTB.  Advertisers select their respective bid prices and see where the chips fall.  

Though there is no guarantee an advertiser’s bid will win the auction, those who participate in enough ad exchanges eventually emerge as winners.  An added bonus is the fact that those who place ads enjoy greater visibility in regard to where their ads will be positioned.

Ad Exchanges are Central to Programmatic Buying

The technology of ad exchanges empowers businesses and advertisers to buy and sell digital ad inventory through real-time bidding.  

The best way to conceptualize an ad exchange is to think of it as a digital market in which parties ranging from advertisers to agencies, publishers and beyond bid on ad inventory from a wide array of publishers.  Advertisers set prices through participation in the bidding process.

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An Inside Look at Open and Private Ad Exchanges

Open ad exchanges are markets that empower buyers, sellers, advertisers and ad networks to access digital ad inventory for purchase and sale.  

In contrast, private ad exchanges, also referred to as private marketplaces, are markets characterized by additional control in which certain buyers and publishers enter competing bids for digital ad inventory.

Ad Exchanges are Fluid, Fast and Efficient

Ad exchanges center on the use of tech to buy/sell digitized advertisements.  The process is automated through the programmatic component in which digital ads are bought for presentation on the web, apps, mobile computing devices, social media and more.  This automated process is characterized by parameters defined by the advertiser.  

Programmatic ads center on the automation of workflow along with machine learning algorithms to provide highly effective ads to audiences.  However, victory in the RTB, short for real-time bidding, is necessary for the digital ad to be presented to the target audience.  The winning bidder reaps the reward of the ad being presented on the mobile app or publisher website.  

Ad Exchanges are not the Same as Ad Networks

There is an important distinction to be made between ad exchanges and ad networks. Though both are forms of programmatic software used for purchasing and selling digital advertisements, each has a unique purpose.  

Ad exchanges serve as a market for advertisers and publishers to purchase/sell ads.  Ad networks purchase inventory through publishers, then sell that inventory to advertisers through intermediaries.  Such a network model does not always include RTB functionality.

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Ad Exchanges Will Shape the Future of Programmatic Advertising

Ask experienced digital marketers about the future of advertising and you will find most agree it will be characterized by programmatic advertising including ad exchanges.  Ad exchanges are highly efficient, low-cost, fast and provide advertisers with enhanced buying control.  Increased control reduces ad impression waste by delivering ads to target audiences and decreasing the potential for ad fraud.  

Publishers also revere this high-tech approach to advertising as it is helpful in pinpointing the optimal demand sources in accordance with nuanced factors ranging from the availability of ad space to bid rates, demand level and more.  Such a setup optimizes inventory to determine the advertisers that can purchase inventory at specific prices.  

In the end, ad exchanges empower advertisers and publishers with more inventory control by defining the following:

  • Budget placement
  • Content
  • Format
  • Location 

The icing on the cake is the ability to gauge performance to obtain a better understanding of the content categories and publishers that are performing the best in the context of outcomes.

Tap Into the Power of Ad Exchanges Today

Whether you are a business owner, advertiser, agency or other party with an interest in connecting businesses to customers or other enterprises, it is in your interest to take full advantage of ad exchanges.  This technology allows for ad blocking, ad filtering, additional control over costs, ad customization and plenty more.  

Perhaps most important is that ad exchanges empower businesses to better align ads with a company’s brand.  Continue to research this marketing technology and you’ll find the benefits extend all the way to blacklisting publishers you do not want to be associated with.  The end result will help maximize your return on ad spend (ROAS).