Ad exchanges are technology platforms that facilitate the bidded buying and selling of online media advertising inventory from multiple ad networks. The approach is technology-driven as opposed to the historical approach of negotiating price on media inventory[1].
In today’s advertising arena, technology is a main factor to how, where, and when an Ad is served. In this article, we will outline the process in which the Ad Exchange works, and the process in which an Ad is served in an auction decision making.
There are 2 major players; the Publisher and the Advertiser. The online user is the initiator of the process, while the exchange makes it all happen.
The auction process:
- A user is reaching a Publisher’s website (with an Internet browser) – a page request is made.
- The site is loading with its page, images, articles and HTML data (arriving from the publisher’s web server). While the site loads, areas in the site (that are set as Ad Slots) are calling the Ad Server. The Ad Server recognizes that an Ad slot is on the page, and that it needs to be filled. An Ad request is then made. Basically, what this request to the Ad Server is stating – is that the publisher is willing to sell his specific inventory, allowing advertisers to buy this inventory.
- The Ad Exchange is then promoting to sell the Ad Slot, allowing the advertisers to bid for the impression.
- The Ad Exchange is presenting the Ad Slot request for the bid (defining the publisher’s requests; Geo Targeting, Frequency capping, allowed advertisers, and more targeting options).
- All advertisers on the exchange are applying for the auction. The Ad Exchange is then reviewing all advertisers. First, the Ad Exchange is eliminating the advertisers that do not meet the Hard Targeting requests of the publisher. For example, assuming the Ad is set to be placed in a France web site, the publisher has specifically requested a France Ad, and as such – the exchange will now eliminate all non-France advertisers. With this, the Ad Exchange assures that only the requested Targeting for this Ad Slot are met.
- Next, the Ad Exchange will review the likelihood of an Ad to convert. How best this Ad will perform, based on historical data that is kept on the exchange.
- Having all the data in place, the Ad Exchange then reviews the bid presented by each advertiser. Adding all the information gathered (bid + prediction) the exchange set a lowest common denominator (in order to compare all bid options).
- Since the advertiser can have campaigns in CPA, CPC, and CPM payment models, the Ad Exchange response is to align all campaigns to one common denominator – in order to compare all applied advertisers as optional bidders, and a winner is set (based on the highest CPM).
- The Ad is then served to the Ad Slot and the impression is presented to the user.
- This entire process has to happen virtually instantaneously to ensure a quality experience for a website user. From the moment the page begins to load, to the publisher’s tools farming it off to an exchange, to the exchanges receiving bids from their own users (advertisers), to being filtered through the verification systems (targeting), and finally returned by an ad server – it all takes place in around less than half of a second.
The complete Ad Exchange auction process [2]:
To verify that the target is working as intended the use of a reliable and geo-precise premium proxy solution is mandatory.
[1] Wikipedia.org
[2] Yahoo’s Right Media kb