How Real Time Bidding, DSPs, SSPs, and Ad Exchanges Work

Let’s say you’re online one day and decide to do a little shoe shopping. You navigate to your favorite store, check out a pair of boots, add something to your cart and just as you’re about to checkout, the phone rings and you get distracted.  By the time you’re done talking to your friend, it’s late and you decide to buy the shoes later.

Then, the next day, you check to see who won the big game last night and you notice an ad from the shoe store you were on last night.  Not only is it an ad for the store, but the exact pair of boots you were looking at are in the ad!  Weird.  You decide to check your email and see that your mom sent you a link to a news article. You go to read the article and staring you in the face on the page is another ad for the same pair of boots, this time tempting you with a 10% discount!

How did the ads know you were shopping for shoes last night, and how did they wind up on all those different sites?  The answer is, probably through an ad exchange.

Ad Exchanges have been around for a few years, but have exploded in importance in the last year.  Along with Demand Side Platforms (DSPs) and Supply Side Platforms (SSPs), Ad Exchanges are dramatically changing the way digital media is bought and sold. If you are a digital marketer or publisher, it is a very exciting time to be working in the industry.

What makes these companies so innovative is how they allow buyers and sellers to value inventory on an impression by impression basis and in real-time.  That’s right, real time.  That means that when you clicked on your mom’s link to the news article and your browser requested an ad from the news site, the publisher put that ad up for auction on an exchange, marketers bid on that impression, and it was served to your browser in about 50 milliseconds, so fast it was indistinguishable from the time it took any other image on the page to render.  Welcome to the world of real-time bidding, or RTB, where marketers value each impression as it is created and the Ad Exchange is where it all happens.

From a technical perspective though, how does the ad exchange process differ from regular ol’ third-party adserving?  I’ll answer that question and diagram the process in my next post, similar to what I showed you in my diagram for how third-party ad serving works.