Programmatic advertising uses ad exchanges, a form of tech that enables highly efficient purchasing and selling of digital ad inventory, for functionality. Businesses and marketers engage in real-time bidding, referred to as RTB, to bid on exchanges for coveted programmatic ads presented before a target audience.
RTB is programmatic advertising that empowers parties to buy/sell digital ads. Auctions occur in real time, allowing advertisers to bid for ad spaces. The highest bid in the auction wins, meaning its ad is presented to the target audience.
An Inside Look at Ad Exchanges
Ad exchanges are digital markets in which publishers, agencies, and advertisers bid on inventory ads from publishers. Those looking to place ads bid for the available positions until a winner emerges. The top bid for the ad position determines the value of the available slot.
There is a difference between private ad exchanges and open ad exchanges. Private ad exchanges are controlled markets in which only certain buyers and publishers bid against one another for inventory. Open ad exchanges are markets that empower buyers, sellers, and advertisers to enjoy easy access to the purchasing and selling of digital ads.
The Inner Workings of Ad Exchanges
Ad exchanges are integral components of programmatic advertising in that tech is used to purchase and sell ads on digital platforms. An automated process is used in the context of programmatic advertising. Advertisers define the parameters for the buying of digital programmatic ads, setting the stage for machine learning algorithms and workflow automation to present the best possible ads to audiences.
Ad Exchanges Are Not the Same As Ad Networks
Ad exchanges and ad networks are forms of programmatic software used to buy/sell digital ads. Each serves a unique purpose. Ad exchanges serve as a market for advertisers and publishers to purchase/sell digital inventory. Ad networks purchase inventory through publishers, then sell that inventory to advertisers as a middleman.
Why Ad Exchanges are Popular
Though few know it, the share of programmatic ads in digital display marketing is a whopping 91.1% in the United States. The programmatic share of digital ads was slightly more than 86% in 2019. This form of advertising is rapidly gaining momentum for several reasons.
Ad exchanges in the context of programmatic advertising are affordable, efficient, and prompt. RTB empowers advertisers to control buying, thereby reducing wasted ad impressions through the delivery of ads to target audiences.
Publishers find this technology useful as it enables them to pinpoint the optimal demand sources to function in accordance with a litany of factors ranging from the availability of space to bid rates, idiosyncratic demand, and more. The end result is inventory optimization that specifies exactly which advertisers can purchase spots at specific price levels.
Ad exchanges ultimately provide publishers and advertisers with that much more control over inventory through the definition of variables:
- Ad format
- Location
- The nuances of content
- Placement budget
Moreover, such exchanges provide buyers with the ability to add brand safety mechanisms to connect with an audience across several formats and publishers. Buyers gauge performance to enhance their understanding of publishers and categories of content that are most likely to produce optimal outcomes.
Transparency, Control, Added Revenue, and Flexibility
Continue to research the merits of ad exchanges in programmatic marketing, and you’ll find those who use this high-tech approach to connecting with target audiences rave about its impact. In particular, ad exchanges have emerged as a popular option for businesses and advertisers as they are highly transparent.
In the context of ad exchanges in programmatic advertising, heightened transparency means purchasing and selling ads with accurate information. Such transparency also minimizes the potential for fraudulent ads, including the potential for traffic/viewership of the ad to be that of bots as opposed to a human audience.
Perhaps most important is the fact that ad exchanges provide publishers with enhanced control. Ad exchanges empower publishers to select the specific audience of potential customers based on idiosyncratic criteria. It is also possible for publishers to restrict access to select parties.
Guaranteeing that the ad space is sold to the party with the highest bid ensures that publishers are provided with the most revenue. A floor price is established to ensure publishers receive fair financial compensation. Add in the fact that ad exchanges provide the golden opportunity for ad customization in terms of ad presentation location for maximum viewer engagement, and there is even more reason for businesses to hop aboard the ad exchange train.