An ad exchange is a marketplace for online advertising content where buyers and sellers can connect to increase the efficiency of ad placement. Companies with ads they want to place can enter the ad exchange to find companies and individuals who have advertising space to offer. The centralized nature keeps the market highly efficient, as buyers and sellers get to directly dictate prices and can find the best fit for their needs. A number of such exchanges operate online and provide services to a range of companies and websites.
Websites with space to offer can enter an ad exchange with some demographic information for advertisers. They need to provide information about the number of impressions they get, the type of content they deliver, and the profile of average users. The more information, the more ads can be targeted, and the more the company can charge for placement. A site that gets large numbers of impressions from a particularly coveted market may be able to charge a premium for its advertising spaces.
Companies looking for ads can set some stipulations for prospective advertisers. They may limit the type of ads by size, content, and aesthetics. They can also indicate how much they expect to receive for advertisers. This may be cost-per-impression placement, monthly ad fees, or another fee structure. Companies with high expectations usually need to have the demographics to back up their demands, or advertisers will look elsewhere.
Advertisers can use an exchange to find the best place to place their ads. They can search placement opportunities by type to get an idea of the options available. When they find sites they like, they can offer bids for ad placement. Ad exchanges may also facilitate rotating banner ads, where websites agree to some basic terms and conditions, set content stipulations, and get a regularly rotating ad. The ad exchange may also allow them to block specific advertisers they do not want to promote or work with.
Advertising networks create advantages for all participants. Companies can get the best placement at the lowest price on an open market exchange. Sellers of ad space can get the best value and have an opportunity to compare themselves to other sites to determine reasonable fees for advertising. The format can also provide an opportunity for small websites to enter the market. These sites may not be able to solicit ads directly, but through an ad exchange they can develop contracts with advertisers and increase their ad revenue.