The differences between private exchanges and public exchanges

Online  ad exchanges  are real-time bidding platforms that expedite, facilitate and simplify the buying and selling of ad inventory. But there are two kinds of ad exchanges, those that are private and those that are public. The process in which the exchanges work is similar, the difference comes in the number of publishers involved in the exchange, transparency, control and their history.

Here’s how ad exchanges work. A publisher’s sales team passes inventory through anSSP or directly to the exchange. Agencies, advertisers and DSPs then bid on impressions in real-time. When an individual visits a media brand’s site, data that has been collected about that individual is sent to the publisher’s ad server, which is then presented to the exchange. The exchange sends a bid request to its buyers, networks and DSPs, who have rules in place for the bid. The bidders overlay this bid request with other data they may have available as well as the client's budget and targeting rules. Based on that information, a bid is made. The exchange then selects the highest bidder and sends the winning ad creative, URL and price to the publisher's server. That buyer’s creative is instantly presented to the visitor.

The main difference between a private and public exchange is that the former is for a singular publisher and the latter has access to inventory across multiple publishers. Going a little deeper, private exchange are closed platforms where the publisher decides which buyers can make bids via the platform and on what terms. There is a singular publisher per each private exchange, and that publisher must approve each buyer. Publishers have more control in a private exchange in terms of the brands and that will ultimately advertise on their sites.

In open exchanges, multiple publishers openly offer their inventory, and there are many buyers bidding on that inventory as well. In an open exchange, the buyer often does not have extensive information about the publisher whose inventory they are bidding on. In a private exchange, the buyer most definitely does that have that information. One clear benefit of the open exchange model is more coverage because of the extensive list of publishers that typically are involved in these exchanges. Buyers looking for wider publicity of its ads may choose an open exchange. While most publishers can take part in an open exchange, it’s more often large publishers with household names that run private exchanges. Buyers looking to advertise on smaller, long-tail sites may be better utilizing the open exchange model.

Clearly, there are reasons buyers and publishers will choose the open model over private, and vice versa. It really comes down to specific campaign objectives for the buyer and how the publisher can monetize all of its inventory via private or public exchanges.

We hope this simplified how programmatic and RTB differ. As always, if you want to learn more about programmatic advertising, watch our latest webinar here or sign into and browse available inventory from our programmatic partners.

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