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Definition

ad exchange

An ad exchange is a software-based automated marketplace that allows publishers to sell their ad inventory and advertisers to bid on and purchase the inventory in real time. The system accesses preestablished criteria to enable transactions and ad placement through real-time bidding (RTB) and programmatic advertising.

When a site user navigates to a web page with available ad space, the page’s code sends a request to the ad exchange. In turn, the ad exchange requests bids for the associated impression from demand-side platforms (DSP) and passes along the publisher’s IP address or other identifier for consideration.

The DSP uses algorithms to find suitable matches between advertisers and publishers. Once a publisher has been selected, the DSP sends a bid for the impression, including an amount and the advertiser data. The ad exchange selects the highest bid from all DSPs that submitted bids, and the winning ad is placed. All of those processes are conducted within the time it takes for the user's requested page to load.

Ad exchanges include AppNexus, Google’s DoubleClick, Microsoft Media Network and OpenX.

This was last updated in February 2017

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