What is an ad exchange, and why do the terms blur?
Part of Supply path transparency
The short answer
An ad exchange is a marketplace that auctions individual ad impressions in real time: sellers offer each impression, connected buyers bid, and the exchange picks a winner under its auction rules. OpenRTB defines an exchange as a service that conducts an auction among bidders per impression. An SSP can run the auction itself, so both words can name one company.
Key takeaways
- An exchange is defined by what it does in a transaction: it holds the auction between sellers and bidders for one impression.
- OpenRTB 3.0 gives an SSP as its example of an exchange, which is the clearest sign that the two terms now overlap.
- Exchanges can sit on both sides of each other, so one impression may pass through two exchanges before a buyer bids.
- The exchange domain a buyer reads in ads.txt should be the domain of the connection that sends the bid requests, which can differ from the brand name.
- Win, billing and loss notices are the exchange's record of what happened to a bid, and only the billing notice signals spend.
What is an ad exchange?
Definition
- Ad exchange
- A technology marketplace that receives ad opportunities from sellers, sends them to connected bidders as bid requests, and awards each impression to a bid under published auction rules.
The OpenRTB 2.6 specification (opens in a new tab) gives a one line definition: an exchange is "a service that conducts an auction among bidders per impression." Google's Authorized Buyers Help describes its own marketplace in similar terms, as an online, auction-driven marketplace where ad impressions are bought and sold in real time (opens in a new tab), one that connects buyers with publishers looking to sell their ad inventory.
The definition is functional. It does not say who owns the exchange, who its customers are or whether it also offers other tools. That is why the word is attached to many kinds of company, and why a buyer learns more from asking what an exchange did in a given transaction than from reading how it describes itself.
How is an ad exchange different from an SSP?
In the early years of programmatic buying the two words described different roles. The exchange was the meeting place where many sellers and many buyers traded. The supply side platform was the publisher's own tool for managing yield, which sent inventory to exchanges. The roles merged as companies built both, and the standards now treat them as overlapping. The OpenRTB 3.0 specification (opens in a new tab) defines an exchange as "an entity (e.g., an SSP) that conducts an auction among bidders per item."
| Term | What it emphasizes | Where it helps a buyer | Where it misleads |
|---|---|---|---|
| Ad exchange | The auction and the marketplace of many buyers and sellers | Points to the place where price is set for each impression | Can suggest a neutral venue, though the definition says nothing about whose interests it serves |
| SSP | Work done for the publisher: floors, blocks, deals, payment | Tells the buyer whose rules shape each bid request | Hides that the same company also runs the auction |
| DSP | Work done for the buyer: bidding, lists, budgets | Clearly the buyer's side of the trade | A DSP can reach an exchange through another exchange, adding a hop the label does not show |
| Advertising system | The neutral term the ads.txt and sellers.json specifications use | Covers SSPs, exchanges and header wrappers alike | Says nothing about which role the system played |
Who connects to an ad exchange?
OpenRTB 3.0's reference model notes that it has become common to have more than one supply chain intermediary, and describes an exchange that "may itself act as a demand source bidding into an upstream (to the left) intermediary and/or use other downstream (to the right) exchanges and DSPs as demand sources." In other words, an exchange can be a seller to one partner and a buyer from another in the same transaction.
| Party | Side | How it connects |
|---|---|---|
| Publisher | Supply | Sends ad requests from its pages, apps or player, directly or through its ad server |
| Header bidding wrapper | Supply | Calls the exchange from the page or a server and passes its bid to the ad server |
| Another exchange or reseller | Supply | Forwards inventory it holds rights to, adding a node to the supply chain |
| Demand side platform | Demand | Receives bid requests and bids for many advertisers and agencies |
| Buyer built bidder | Demand | Large buyers can connect their own system; Google calls this a real-time bidder that connects to its servers |
| Downstream exchange | Demand | Bids into the first exchange on behalf of its own connected buyers |
OpenRTB also says each party has a business relationship only with its directly connected neighbors. The exchange a buyer's platform talks to may know nothing about the companies two hops upstream, which is why the supply chain object exists to carry that history inside the request.
How do exchanges run auctions?
The OpenRTB 2.6 basics section describes the cycle: bid requests are broadcast to bidders, responses are evaluated under prevailing auction rules, and a winner is selected. The win notice informs the bidder's pricing algorithms of a success, "whereas the billing notice indicates that spend should actually be applied." A loss notice, where the exchange supports it, tells a bidder why its bid did not win. What makes a win billable, such as delivery or viewability, is left to each exchange's business policy.
| Transaction type | Google Ad Manager Help description | Auction or fixed price |
|---|---|---|
| Open Auction | Auction-based transactions for inventory available to all buyers | Auction |
| Private Auction | Auction-based transactions with specific buyer(s) that are allowlisted by company | Auction |
| Preferred Deal | Fixed-price, pre-auction transactions that the publisher negotiates with specific buyer(s) | Fixed price |
| Programmatic Guaranteed | Fixed-price transactions with a pre-committed set of inventory | Fixed price |
The transaction types listed by Google Ad Manager (opens in a new tab) also include Open Bidding, First Look and others; these four are the open, private, preferred and guaranteed forms. Names vary from exchange to exchange, so confirm each exchange's own terms before a deal is set up. Deal setup is covered in the deal ID guide and the preferred deals guide.
Why do buyers see exchange names in seller files?
Every ads.txt line begins with the domain of an advertising system, and that system publishes its sellers.json file on the same domain. The domain can differ from the name the exchange uses in its marketing. The ads.txt 1.1 specification (opens in a new tab) allows the operational domain of the system when it differs from the parent corporate domain, and adds that if a parent company is operating multiple distinct SSP or exchange businesses, the domain should refer to the RTB connection that the bidder is receiving bid requests from.
Reading an exchange domain in a seller file
- The domain matches a connection the buying platform actually receives bid requests from.
- A sellers.json file exists at that domain and lists the account ID from the ads.txt line.
- Two domains owned by one parent company are treated as two separate exchanges with separate accounts.
- An unfamiliar domain is looked up in its own sellers.json, whose contact fields name the business behind it.
- The exchange domain in the bid request's supply chain node is the same one the publisher listed.
The sellers.json specification (opens in a new tab) offers optional contact_email and contact_address fields for the advertising system itself, and an identifiers array for business IDs. When an exchange domain on a plan means nothing to the desk, those fields are the quickest way to find out who runs it.
What does reading exchange names look like on a real plan?
Fictional example
An independent pharmacy group in Idaho and Montana
A fictional independent pharmacy group with stores in Boise and Missoula wants ads beside health, family and regional news content read in Idaho and Montana, in English. The planner has a shortlist of regional news sites and community health guides, and the trading desk wants to know which exchanges can deliver them.
Reading the sites' ads.txt files, the planner finds two domains that belong to the same parent company. The desk's buying platform receives bid requests from only one of them, so lines on the other domain are not a usable path for this campaign, even though the brand name is the same.
A third domain appears on several community health guides and is unknown to the desk. Its sellers.json lists contact details for a regional sales house that represents small local sites, and the entries for these guides are typed INTERMEDIARY. The planner notes the sales house as an authorized reseller path and asks it whether a private auction is possible, rather than treating the unfamiliar name as a risk.
How does PlacementGraph show which exchanges sell a site?
Frequently asked questions
Can a buyer connect to an ad exchange without a DSP?
Yes, if it builds the technology. Google's Authorized Buyers Help describes buyers who build their own real-time bidder that connects to Google servers and receives a steady flow of bid requests. Agencies and brands can use a demand side platform instead, because it connects to many exchanges.
Is an ad network the same as an ad exchange?
Not quite. A network gathers inventory from many publishers and sells it as its own package, while an exchange runs an auction between many sellers and many bidders. OpenRTB lists networks working with publishers among the suppliers of inventory, so a network can also send inventory into an exchange as one more seller.
Can one impression pass through two ad exchanges?
Yes. OpenRTB 3.0 describes exchanges that use other exchanges as demand sources. When that happens, each exchange should add its own node to the supply chain object, so the buyer can see both hops. The specification notes that latency and successive revenue shares tend to impose natural limits on how long these chains get.
Does the exchange learn which advertiser won?
Yes. In OpenRTB 2.6 each bid carries adomain, the advertiser domain for block list checking, and seat, the buyer seat the bid is made for. The exchange uses them to enforce the publisher's blocks and deal rules. Exchanges can mandate that only one advertiser domain is allowed per bid.
Sources
- OpenRTB 2.6 specification (opens in a new tab)IAB Tech Lab, OpenRTB 2.x repository
- OpenRTB Specification v3.0 (opens in a new tab)IAB Tech Lab, OpenRTB repository
- Authorized Buyers overview (opens in a new tab)Google Authorized Buyers Help
- Transaction types (opens in a new tab)Google Ad Manager Help
- ads.txt Specification Version 1.1 (opens in a new tab)IAB Tech Lab, Supply Chain Validation repository
- sellers.json specification (opens in a new tab)IAB Tech Lab, Supply Chain Validation repository
Researched and written by PlacementGraph Research. Read how we research, source and update these pages. Corrections: diana@placementgraph.com.