Ad Exchange

Roberto Tranquilli
April 8, 2022

Ad Exchange

In the anatomy of an app install campaign, and especially in programmatic advertising and real-time bidding, Ad Exchanges play a key role between publishers and advertisers. They connect Supply-Side Platforms (SSPs) and Demand-Side Platforms (DSPs) for real time auctions. 

What is an Ad Exchange?

An Ad Exchanges is a digital marketplace, where Demand-Side Platforms and Supply-Side Platforms buy and sell digital ad placements on behalf of advertisers and publishers.  

Publishers, which own websites, mobile apps and mobile sites connect to Ad Exchange in order to sell their digital ad inventory, which is collected by Supply-Side Platforms (SSPs). SSPs notify the Ad Exchange whenever an ad space is available, along with data such as location, Internet Service Provider, operating system, size and many more. 

Then, the Ad Exchange notifies Demand-Side Platforms (DSPs), which, on behalf of advertisers, bid on a CPM basis to buy that ad space and the highest bid wins. As a result, the DSP which has won the real time auction will show the ad on the publisher’s website or app or mobile site. 

DSPs bid on ad spaces based on different targeting criteria they can choose, from ad size and operating system to location and internet connection. Some criteria are usually chosen by advertisers when developing the strategy for the app install campaign. These real time auctions take place in milliseconds and are managed by software and machine learning algorithms. 

There are three ways of buying ad spaces within the Ad Exchange: 

  • Open Ad Exchange: it is the digital marketplace open to any advertisers and publishers. It is perfect to reach the widest possible audience since there are billions of impressions and ad placements available at any moment. However, a huge number of publishers and impressions also means less detail about them and higher risk of fraud compared to a private exchange. 
  • Private MarketPlace (PMP): a private marketplace is a closed auction where one publisher sells its ad inventory to a group of selected advertisers. There is more control over prices, bids and fraud. At the same time, it takes more time to establish relationships between publishers and advertisers. 
  • Private deals: private deals between publishers and advertisers make sure they can sell and buy ad placements to each other at a fixed price. As a consequence, advertisers can rely on exclusive ad inventory and a fixed cost structure, while publishers can benefit from a stable revenue stream. 

Why is it important?

Ad Exchanges are increasingly popular among publishers and advertisers for app install campaigns because they provide full transparency throughout the process of buying and selling digital ad placements. The risk of fraud is significantly lower than the one associated with affiliate marketing and other platforms related to app install campaigns. 

In addition, since the whole process is automated, advertisers and publishers can leverage A.I. technologies such as machine learning algorithms in order to optimize their app install campaigns, save time and money and increase their Return On Ad Spend (ROAS)

Thanks to DSPs, advertisers can avoid negotiating with media sources while having access to a myriad of publishers at the same time. Extensive targeting options provided by the Ad Exchanges allow advertisers to maximize their profit by showing their ad creatives only to the right audience, consisting of users who are more likely to become loyal customers. 

What you need to know about Ad Exchanges?

  • Ad Exchanges allow advertisers and publishers to buy and sell digital ad spaces in real time;
  • The media buying process is fully automated and provides full transparency;
  • DSPs bid on a CPM basis on behalf of advertisers;
  • DSPs buy ad placements on behalf of advertisers for their app install campaigns;
  • There are three types of Ad Exchanges: Open Exchange, Private MarketPlace and Private Deals;
  • Ad Exchanges provide sophisticated targeting options which help reach the right audience for advertisers;
  • Advertisers can maximize their profit by leveraging machine learning algorithms while buying ad placements in Ad Exchanges.