Definition
The first exchanges, Right Media and DoubleClick Ad Exchange in the late 2000s, were built so that networks with unsold inventory could offer it to networks with unmet demand without a sales call. The model generalized: today a publisher's supply-side platform (SSP) sends each impression to one or more exchanges, each exchange sends a bid request to the demand-side platforms (DSPs) connected to it, and the highest bid wins within the time budget. The exchange's revenue is a fee per transaction; it holds no inventory and sets no prices.
How an ad exchange works
- A page loads and the publisher's SSP creates a bid request: impression size or format, page context, device, GEO, user identifiers allowed by consent.
- The exchange forwards the request to connected DSPs.
- Each DSP decides in milliseconds whether to bid and how much, on behalf of its advertisers.
- The exchange picks the winner, applies the auction rule (first-price is standard since 2019), and returns the ad markup.
- The impression renders; billing notifications confirm the price paid.
Ad exchange vs ad network
| Aspect | Ad network | Ad exchange |
|---|---|---|
| Owns publisher relationships | Yes | No |
| Sets prices | Minimum bids per GEO and format | No, the auction does |
| Who buys | Advertisers with an account | DSPs and networks over RTB |
| Moderation of creatives | By the network | By the supply side and DSP policies |
| Revenue | Margin on media | Transaction fee |
Networks and exchanges are not rivals so much as layers: an ad network with its own advertisers also plugs into exchanges and DSPs to sell inventory those advertisers do not take, and buys from them when its advertisers want more reach.
Who uses ad exchanges
Publishers and SSPs on the sell side; DSPs, agency trading desks and ad networks on the buy side. A performance advertiser rarely touches an exchange directly; it either uses a DSP or buys from a network that has done the integration. Networks such as Reacheffect expose their pop, banner, native and video inventory to DSPs over OpenRTB and their pop, push, in-page push and direct click inventory over XML and JSON feeds priced per click.
Related terms
| Term | Relation | Where defined |
|---|---|---|
| Real-time bidding | The auction mechanism | Term page |
| Ad network | Inventory owner that sells through exchanges | Term page |
| DSP | The buyer's side | Glossary entry |
| SSP | The seller's side | Glossary entry |
FAQ
Is Google AdX an ad exchange?
Yes. Google Ad Exchange (now part of Google Ad Manager) is the largest exchange by volume, connecting Google's publisher inventory to Google's and third-party DSPs.
Do ad exchanges sell pop and push traffic?
Mostly not through OpenRTB display exchanges. Pop, push and direct click inventory is traded between networks and DSPs over XML and JSON feeds priced per click, which perform the same role for those formats.
What is the difference between first-price and second-price auctions?
In a first-price auction the winner pays its bid; in a second-price auction it pays just above the second-highest bid. Exchanges moved to first-price in 2019 to make pricing transparent.