At a high level, one key difference is that an Ad Exchange is a type of business or platform in digital advertising where RTB is a protocol for two digital advertising companies to transact.

Ad Exchanges
Ad Exchanges were originally created to connect and bring efficiency to digital advertising markets. Previous to Ad Exchanges, Ad Networks, the prevailing digital advertising companies at the time, often had too much demand from buyers or too much supply from sellers on their networks. In order to correct the imbalances, networks would strike individual deals to buy and sell ads from each other. This led to a proliferation of ad-hoc relationships causing ads to be passed from network to network several times before finally being purchased. These “daisy-chains” produced several problems including latency, multiple networks taking fees for a single ad, and a lack of transparency on what was actually being purchased. There were also additional burdens relating to operational inefficiencies of dealing with advertising code from several different Ad Networks.

The Ad Exchange created a single point of integration for networks eliminating issues of latency and increasing efficiency in deals between networks. These transactions were not done with real-time bidding (RTB) initially though. That came later. The Ad Exchange only allowed separate networks on the same exchange to transact with greater efficiency. The benefit to end marketers and publishers was a more liquid marketplace with greater pools of advertising supply and demand.


Real-time bidding
The Ad Exchange was great for consolidating integrations of ad networks. However, there wasn’t just one exchange created. Several Ad Exchanges popped up and later other platforms came in to existence that specifically focused on buyers (Demand Side Platforms) and sellers (Supply Side Platforms). This proliferation created new inefficiencies and technical hurdles for integrating separate digital advertising platforms.

RTB was created as a protocol to connect the many different platforms of digital advertising (e.g. Ad Exchange, Demand Side Platforms, Sell Side Platforms, Ad Networks, etc). However, the other major change ushered in by RTB was that it allowed these entities to buy ads on an individual ad opportunity basis. Previous to RTB, buyers would have to transact with sellers based on historical information of ad performance. The RTB breakthrough allowed buyers to determine a potential advertising opportunity’s value in real-time (typically less than 100ms) based on granular data such as anonymous user information, time of day, device type, ad position, and more.

How things work today
Today several companies have created their own “exchanges” as a way for buyers to access their unsold supply. For example, a large digital publisher or group of publishers may want to provide buyers direct access to purchase their unsold digital advertising inventory. These publishers can build an exchange to auction off their unsold digital advertising inventory to multiple buyers and external buying platforms via the RTB protocol.

However, Ad Exchanges are not the only ones using RTB today. Most platforms in ad tech today are RTB enabled. For example, a SSP could hold an auction via RTB protocol and a DSP could win the auction and purchase the advertising opportunity. In this case, an Ad Exchange is not involved in the transaction.

The last thing to note is that RTB is often confused with the term “programmatic.” RTB is actually a subset of programmatic buying which really refers to any automated way of transacting digital advertisements between buyers and sellers. Although RTB is a very popular method, it is not the only programmatic way to buy digital advertising.