What is Ad Exchange and how does it work?

Published: June 23, 2022

Last Modified: February 20, 2023

What is Ad Exchange and how does it work?

An advertising exchange is a marketplace where buyers and sellers come together to exchange advertisements. Buyers (that is, advertisers and agencies) use DSPs to bid on individual impressions. These impressions are offered for sale by merchants through Ad Provider Platforms (SSPs).

This process of buying and selling is done through Real Time Trading (RTB).

Ad exchanges were once standalone platforms, and many of them still operate, but over the past few years, many AdTech companies have incorporated ad exchange features into their SSPs and vice versa. This allows advertisers to manage their ads and sell ads via RTB on one platform.

Ad Exchange in the mobile world

Ad exchanges are automated or software marketplace platforms for ad network assets with real-time auctions (RTB). As the mobile environment evolves and grows, buyers and sellers are using ad exchanges to streamline processes and increase profits.

Real-time auctions allow advertisers to consistently and instantly bid on ad inventory. When a user visits a web page or page in an app, an ad impression is generated. Data from the page is sent to the ad exchange. There, advertisers participate in the auction for each impression. The highest bidder wins the impression, and the ad is displayed in real time.

Who uses Ad Exchange?

Any entity that is an authorized buyer may purchase promotional stock from advertising exchanges.

Website, online magazine or blog owners, known as “publishers”, use SSP (vendor-side platform) to connect to the Ad Exchange and make their ad space available to buyers.

Independent marketers, advertising agencies, and ad networks known as “advertisers” use the DSP (Demand Side Platform) to connect to the Ad Exchange in order to purchase ad space.

Ad networks also buy ad space on the exchange, label it, and sell it for a profit. ATDs (Agency Trading Desks) use the Ad Exchange to buy large ad inventory and sell it wholesale to individual advertisers.

How do ad exchanges work?

The publisher connects to the ad exchange directly through supply-side platforms and/or ad networks. Generally, publishers expect to get access to good bidders for their inventory, as well as sell their unsold inventory.

To get better returns, publishers allow targeting options by providing exchanges with their user demographics and other targeting information. They store this data, including targeting criteria, and allow you to set a minimum price to help publishers find the right buyers.

Advertisers, as well as publishers, connect to exchanges directly or through demand platforms. With the help of DSP, advertisers define their target audience and set up advertising campaigns. Exchanges also store campaign requirements, signal advertisers when an opportunity arises, and ask them to submit their bids.

What happens after you receive a bid request from the Ad Exchange?

A bid request is triggered when a user visits a publisher’s website, which is received by the ad exchange. Along with the bid request, the Ad Exchange also receives user-specific data such as location and browsing history.

The ad exchange then sends a bid request to advertisers. After that, the ad exchange collects all bids and chooses the highest one as the winner. It then returns the signal to the publisher’s site and places the winning creative after it is received from the partner’s ad server.

How is Ad Exchange different from an ad network?

An ad exchange and an ad network may sound the same to most publishers—they both manage and sell inventory. But there are differences.

Unfortunately, there are a huge number of companies, technologies, organizations, and everything in the advertising technology industry that seem to be stepping on each other’s heels and filling suspiciously similar roles. This can be very frustrating if you are trying to control everything.

However, in the case of an ad network and an ad exchange, there are some important differences to learn that can help you.

1. Purpose distinction

The ad network seeks to maximize publishers’ profits by selling inventory at the highest price. Whereas an ad exchange simply wants to provide a perfect match between seller and buyer.

2. Difference Between Base Models

The basic model of an ad network is to collect publishers’ ads, categorize them, and sell them for a profit. In ad networks, advertisers don’t know where their ads will appear. And publishers don’t know whose ads they’re showing.

On the other hand, exchanges are transparent. They leave auctions open to advertisers and advertising agencies. Thus, everyone can see how money is exchanged between buyers and sellers. It then links the seller and buyer in such a way that the exchange is visible to all involved parties/platforms (SSP, DSP, and other providers).

3. Size disparity

An ad exchange is more than an ad network. So sometimes the ad network ends up buying ads on ad exchanges and gets the right to resell them for a profit. For example, Google AdSense is an advertising network, and Google Ad Exchange is an ad exchange. Here, AdSense only gets its demand from Google’s Display Network (GDN), while AdSense connects publishers to a larger advertiser marketplace and DSP.


  • Ad networks offer specificity. Ad exchanges offer variety.
  • Ad networks are companies. Ad exchanges are technology platforms.
  • In advertising networks, prices remain unchanged. Ad Exchange auction base prices
  • Ad networks need time to optimize campaigns. Ad exchanges allow you to optimize your campaign on the fly.

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