Mutual beneficial outcomes, without exchange of significant amounts of money are totally possible.

As an example, AMS-IX is completely non-profit, see: https://www.ams-ix.net/ams/about-ams-ix

[Edit: realised I didn't actually answer your question: it is much cheaper, at scale]

Does there have to be an explicit agreement? Why can't both parties simply advertise via BGP and let the algorithm sort it out?

If an online service can determine where the majority of its users are network-wise, then they'd set up a mirror at the closest IXP.