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Ad Exchange

Definition

An ad exchange is a digital marketplace that allows advertisers and publishers to buy and sell digital ad space. An ad exchange is a large pool of ad impressions that publishers receive on their sites. Buyers choose which impressions they wish to purchase and are able to target audiences based on their browsing behavior, demographics, interest profiles, and other additional data.

The advertisement space is bought and sold through real-time auctions using real-time bidding to determine the prices for the inventory. Ad exchanges are mostly used to sell display, video, and mobile ad inventory. The exchanges allow advertisers to be able to buy ads across many sites at once, compared to negotiating buys directly with individual publishers, making it a more efficient and effective way to sell and buy advertising.

Buyers and publishers purchase and sell their ad space through ad exchange operators. Some of the major ad exchange operators include: Google, The Rubicon Project, AppNexus, PubMatic, and OpenX. The operators are responsible for what impressions they allow into the marketplaces and subsequently allow buyers access to these impressions. It is difficult for the operators to keep track of who is selling and buying what since billions of ad impressions flow through the ad exchanges everyday. This means that buyers are never exactly sure where their impressions are showing up and sellers are never exactly sure who is purchasing their impressions.