What is an Ad Exchange and does it Work?

Ad Exchange

An ad exchange plays a central role in programmatic advertising. When a user accesses a website or an app, in a matter of milliseconds, data is sent to the so-called ad exchange server. This marketplace brings together advertisers with their demand and publishers and app developers with their offerings.

Ad exchanges are indispensable to the programmatic ecosystem. That’s why we’ve prepared this article, where you’ll understand how the evaluation of bids that occurs on this platform works.

What is an Ad Exchange?

Ad Exchange

An ad exchange is connected to an automated market, where publishers and developers interested in offering ad space to advertisers who want to distribute ads are present.

Essa plataforma de tecnologia usada na programmatic advertiser permite a compra e a venda de inventário digital por meio de real-time bidding (RTB).

This technological platform used in programmatic advertising enables the buying and selling of digital inventory through real-time bidding (RTB).

That means, an ad exchange is a digital marketplace where advertisers, agencies, publishers, app developers, selling platforms (SSPs) and buying platforms (DSPs) can bid on the ad inventory of different publishers and developers. Advertisers determine prices by participating in the bidding process.

Open Ad Exchange vs Private Ad Exchange vs Preferred Ad Exchange

An open ad exchange allows all sellers, buyers, ad networks and advertisers to access buying and selling digital inventory transactions and are remunerated through a commission on the transactions carried out.

Private ad exchanges (PMP) are controlled, where only a selected part of publishers, developers and buyers are invited to participate and bid on inventory, and normally charge access and service fees.

On the other hand, the preferred ad exchanges allow a publisher or app developer to sell ad inventory at a fixed price, negotiated in advance with advertisers. This personalized approach gives publishers, app developers and advertisers the opportunity to have stability when buying or selling ads.

How does Ad Exchange Work?

Ad exchanges use technology to buy and sell digital ads. Programmatic Advertiser relies on an automated process, with parameters defined by the advertiser, to buy ad inventory on the web, in apps and on mobile devices in multiple ad formats.

Programmatic Advertiser automates the workflow through a machine learning algorithm, in order to present the audience relevant ads, based on a conglomerate of data.

Real-Time Bidding (RTB) 

Real-time bidding (RTB) is the protocol that allows programmatic advertisers to buy and sell digital ads in real time. When a user accesses a website or a mobile app, an auction takes place between advertisers, who bid and compete for the respective ad space. The advertiser who bids the highest during the auction will be entitled to run their ad on the website or app.


RTB auctions are enabled by a process involving supply-side platforms (SSP), demand-side platforms (DSP) and ad exchanges. An SSP is a programmatic software used by publishers and app developers that sell ad impressions, while a DSP is software that allows advertisers to purchase media from different sources in an automated and centralized way.

An ad exchange makes SSPs and DSPs communicate with each other, allowing publishers, app developers and advertisers to trade ad inventory via RTB.


Some types of programmatic ads are priced at cost per thousand (CPM) or cost per thousand impressions. This is a model where the advertiser pays a certain amount per 1000 impressions or the number of times your ad is displayed.

The process starts with making a publisher or app developer’s inventory available on the ad exchange via an SSP platform, specifying the necessary information about that inventory, including audiences and geographic destinations. This allows the advertiser to communicate with the ad exchange via a DSP platform, in order to bid on inventory. It is up to the ad exchange to identify the most relevant proposer for targeted inventory.

Ad Exchanges Principles

The purpose of ad exchanges is to automate the management of large amounts of inventory. When this activity is carried out by humans, in addition of being very time consuming, the process is less efficient and the processing costs are very high when compared to traditional online media buying.

Ad Exchanges Benefits

Digital drives brands and is expected to account for 55.5% of overall ad spend in 2022 (US$409.9 billion). The fastest growing markets are India, USA and Brazil.

The rise of this type of advertising is due to its speed, efficiency and profitability.

RTB auctions give advertisers more control over their purchases, reducing wasted ad impressions by showing ads to a relevant audience and minimizing the risk of fraud.

At the same time, publishers and app developers can use this technology to find relevant sources of inventory based on factors such as latency, unique demand, bid rates and availability of ad placements.

In this way, they are able to optimize their inventory by specifying which advertiser can buy and at what price.

An ad exchange gives media sellers and buyers greater control over inventory by identifying placement, format, content and budget for placement. In addition, ad exchanges offer buyers the ability to apply brand safety mechanisms and reach their public through different publishers, app developers and formats.


Ad Exchanges vs Ad Networks

An ad network is a platform connected to multiple websites and mobile apps that offers ad inventory to advertisers on websites and apps connected to the network, while an ad exchange resembles a trading floor, where advertisers can buy ad space from various ad networks.

Ad exchanges are often used by publishers and app developers to auction remaining inventory to the highest bidder, after the premium inventory has already been manually sold.

One of the technologies that has made programmatic advertise prosper is certainly the ad exchanges, which provide great benefits to the advertiser’s campaigns, such as better segmentation and a time-based bidding system.

Qualified Segmentation

Automating the purchase of ad space is effective and allows the advertiser to show their ads to the target audience that are linen up with the brand’s digital strategy. Ad exchanges work in this direction, where publishers and app developers qualify ad inventory by adding information through qualifying metadata, such as the public or the theme of their pages, while advertisers determine their bids according to their targeting criteria.


Summing up, using an ad exchange is a great way for publishers and app developers to sell ad space, and a reliable platform for marketers to increase their brand’s visibility. This platform helps buyers and sellers to negotiate digital ad inventory as per their requirements.

If you want full control of campaigns, no fees and full transparency through premium programmatic with an easy plug and play experience, GnetRTB has its own ad exchange, directly connecting Global DSP’s to the main inventory in Latin America. Access this link and be assisted by our experts team.