Overview

Ad Exchange platforms (AdX) integrate advertising resources and networks, facilitating the sale of advertising space through various transaction methods, including programmatic direct buying, preferred deals, and real-time bidding. DSPs can interface with AdX to purchase media ad impressions transparently through different transaction methods, accurately targeting audiences to improve advertising ROI. Theoretically, the role of a Supply-Side Platform (SSP) is to connect with media and then to AdX. However, since the functionality of SSPs is now essentially the same as AdX, we can discuss Ad Exchange and SSP together under the term AdX.

Common Transaction Models of Domestic AdX

PDB (Programmatic Direct Buying):PDB is the preferred model for the highest quality advertising resources in media. These resources are often in high demand and sought after by advertisers. To secure these premium resources, advertisers typically negotiate a fixed price with the media in advance, reserving these spots exclusively. Unlike traditional advertising, PDB allows for audience targeting, but this targeting is limited to a few broad demographic dimensions.

PD (Preferred Deals):After the highest-quality resources are secured by major brands, there remains a pool of relatively high-quality resources with uncertain impressions. If an advertiser purchases these uncertain volumes at a negotiated price, this model is known as PD. The downside of PD is the uncertainty of resource allocation, but the advantage is that the advertiser does not have to commit to a certain volume of impressions and can target the specific audience they need, preventing waste of advertising resources.

RTB (Real Time Bidding):After the high-quality resources are purchased, there will always be some less desirable resources left that are not favored by advertisers. Media does not want to waste these long-tail and lower-quality resources, so they are put on the open market for smaller advertisers to bid on through RTB. The placement and pricing of these resources are uncertain and determined in realtime.

Comparison of AdX Transaction Models

Model	Buying Method	Requires Advance Order	Display Priority	Guarantee Volume	Resource Quality	Resource Placement Reservation	Pricing and Volume Guarantee
PDB	Fixed CPM/CPD	Yes	Highest	Yes	Premium	Yes	Fixed price, fixed volume
PD	Fixed CPM	Yes	After premium	No	Relatively good	No	Fixed price, no volume guarantee
RTB	Bid CPM	No	Remaining traffic	No	Non-premium	No	No price or volume guarantee

Classification and Examples of Domestic AdX

AdX platforms are generally classified into public and private AdX based on their ownership of the main media resources.

Public AdX:Public AdX does not own media resources and acts as a typical intermediary matching buyers and sellers. The characteristics of these AdX include large traffic volume and low prices, but the quality of traffic is inconsistent, mainly consisting of long-tail traffic and a small amount of surplus traffic from top vertical media (media that have not established their own AdX).

Private AdX:These AdX platforms belong to major media owners and are centered around the resources of these media. Examples include the AdX of major portal media (Tencent, Sina, Sohu, etc.), video media (YouTube, IQIYI, LeTV, etc.), and emerging mobile media (Xiaomi, Momo, etc.). The traffic quality of these AdXsis relatively better since it is the media’s traffic, and the prices are slightly higher. Sometimes, to reduce the overall buying cost, these AdX may also introduce cheaper external media traffic in addition to their own.

AdX as a Key Gatekeeper in Advertising Review

In the advertising placement process, the review of advertising materials and the qualifications of advertisers is a key step that directly affects the efficiency of advertising placement, the quality of advertising, and the reliability of advertising information. The media that ultimately publishes the information is the responsible entity as stipulated by advertising law.

As the most centralized hub of advertising transactions, AdX has become the main gatekeeper for the review process. The review mainly involves the qualifications of advertisers, the upload and review of advertising materials, the review of advertiser qualifications and materials from the DSP side, and the review of advertiser qualifications and materials from the AdX side. Understanding the review entities should provide a basic understanding of whom to consult and appeal to in daily work practice.

KPIs Around AdX

These data indicators are seen from the perspective of AdX and may not be the same as what DSPs see due to network losses:

● Total available bid requests: Based on the total traffic of AdX, the total number of bid requestscan be sent to various DSPs, which isconsideredas the available inventory of AdX.

● Filtered request volume: After setting filtering conditions on the AdX self-service platform, the number of bid requests filtered by each DSP, such as filtering certain sizes or websites.

● Actual request sent: AdX will send the actual number of bid requests to each DSP based on the QPS limits set by the DSP on the AdX self-service platform. This indicator shows how much inventory the DSP can see, and AdX can also evaluate the consumption capacity of each DSP.

● Actual request rate: The ratio of the actual number of requests sent by AdX to each DSP to the total number of available bid requests. AdX can use this indicator to assess the consumption capacity of each DSP.

● Number of bids: The number of bids a DSP participates in.

● Bid participation rate: The proportion of the number of bids a DSP participatesininto the actual number of requests sent. AdX can use this indicator to assess the purchasing willingness of each DSP.

● Number of abandoned bids: The number of bids a DSP has abandoned as seen by AdX (actual request number – number of bids).

● Abandoned bid rate: The ratio of the number of abandoned bids a DSP has to the actual number of requests sent.

● Number of valid bids: The number of bids successfully responded to that meet the placement constraints (can be placed) for materials and advertisers.

● Number of invalid bids: The number of invalid bids due to reasons such as unreviewed advertiser qualifications, banned industries and categories, response timeout, parsing errors, etc. AdX can use this indicator to assess the technical and execution management capabilities of each DSP and assist in reducing this number.

● Response timeout count: The number of network failures or response timeouts (generally required <100ms) received from a DSP.

● Response timeout rate: The ratio of the response timeout count of a DSP to the actual number of requests sent. AdX can use this indicator to assess the technical capabilities of the DSP’s Bidder and network conditions.

● Parsing error count: The number of parsing failures caused by incorrect data packet formats returned by a DSP in the bidding process.

● Parsing error rate: The ratio of the parsing error count of a DSP’s returned package to the actual number of requests sent.

● Number of successful bids: The number of advertising exposure opportunities successfully won by a DSP.

● Bid success rate: The ratio of the number of successful bids a DSP has to the number of bids participated in.

● Number of failed bids: The number of bids a DSP did not win in the bidding process because the bid was not the highest (valid bid number – number of successful wins).

● Bid failure rate: The ratio of the number of failed bids a DSP has to the number of bids participated in.

● Traffic utilization rate: The ratio of the number of successful bids a DSP has to the actual number of requests sent.