What is an open ad exchange, and how does it compare to direct media buying?

An open ad exchange is a platform that facilitates the buying and selling of digital advertising indirectly through third parties. When a website, app, or other content publisher has unsold inventory that it cannot fulfill directly, the publisher may opt to offer that inventory, known as remnant or programmatic inventory, through an open ad exchange. This inventory is usually purchased in auction to the highest bidder.

The benefits for publishers is additional revenue, of course, because the publisher can earn revenue from unsold inventory. Extra inventory can become available for a variety of reasons, chiefly due to unpredicted traffic spikes.

One benefit for ad buyers is that this inventory can be less expensive than purchasing directly from the publisher. This is not a guarantee, however, and can actually be more expensive in some cases. This is because the exchange itself is an added beneficiary who will take a share of the buy. In addition, competitive bidding in the auction can inflate the price.

The disadvantage for advertisers is that placement is not guaranteed. It can serve anywhere in the participating ad networks where inventory is available. This can be mitigated through blacklisting/whitelisting or through layered targeting, guaranteeing ads serve to the right audience.