Ad exchanges are digital marketplaces where advertisers and publishers come together to buy and sell advertising space in real-time through an automated process. Here’s how they typically work:

Publisher Integration: Publishers (websites or apps) integrate ad exchange technology into their platforms. This technology allows them to offer their ad inventory (space on their platform where ads can be displayed) for sale.

Advertiser Integration: ad network vs ad exchange or their representatives (such as ad agencies) also integrate with ad exchanges. They set up campaigns specifying criteria like target audience, ad format, budget, and bidding strategy.

User Visits Publisher’s Platform: When a user visits a publisher’s website or app, the publisher’s ad server sends a request to the ad exchange, indicating that there is available ad space.

Real-Time Auction: The ad exchange conducts a lightning-fast auction among advertisers interested in displaying ads to that particular user at that moment. Advertisers submit bids based on their campaign criteria and the value they place on reaching that user.

Winning Bidder and Ad Display: The ad exchange determines the winning bidder based on the highest bid and other factors like ad relevance and quality. The winning ad is then served to the user on the publisher’s platform.

Ad Display and Tracking: The ad is displayed to the user, typically within milliseconds of the auction. The ad exchange also tracks important metrics like impressions, clicks, and conversions to provide feedback to advertisers and publishers.

Payment and Settlement: Advertisers are charged based on the bidding model they selected (e.g., cost-per-click, cost-per-thousand-impressions), and publishers receive payment for the ad space they provided. Ad exchanges often facilitate the payment and settlement process between advertisers and publishers.

Overall, ad exchanges streamline the buying and selling of digital advertising space, making the process more efficient and scalable for both advertisers and publishers.