Written by Ben Morrisroe
20 Feb, 2020
Get ready for a deep dive into header bidding in all its glory. It has become THE buzz word in the ad tech world and for good reason!
We are going to walk you through the good, the bad and the ugly (it’s pretty much all good for you, unless you’re reading this, Google).
WHAT IS HEADER BIDDING
Header bidding, also known as pre-bidding, is an advanced programmatic technique where publishers offer inventory to multiple ad exchanges at the same time before making calls to their ad servers (mostly DoubleClick for Publishers). The idea is by letting multiple demand sources bid on the same inventory at the same time, publishers increase their yield and make more money. And who doesn’t want more money?
It is a way for publishers to simultaneously offer ad space out to numerous SSPs or Ad exchanges all at one time. It also gives publishers a lot more control over the process, including who they sell it to.
WHAT CAME BEFORE HEADER BIDDING?
Before header bidding was introduced, ad space was auctioned off and delivered only once the ad placements began to load on a webpage.
When a person visited a website, the publisher’s direct orders would be served first, because they sat at the highest priority in the ad server. Direct orders guaranteed a certain number of impressions for the advertiser and for this priority and reservation of impressions, direct advertisers pay a premium. If the visitor views enough pages on the site so that the frequency cap on the direct order is exhausted, the ad server will pass the impression down to the programmatic line items in a sequential “waterfall system”, where the visitor enters a real-time auction environment where advertisers bid to serve their ads to visitors.
Publishers Received Lower Overall revenue From the Waterfall System
Unsold inventory is offered to the top-ranked ad exchange, normally determined by size, rather than willingness to pay the highest price for that impression. For publishers, this meant lower overall revenue as their inventory was not automatically sold to the highest bidder, but rather the biggest ad exchange. On top of all this as mentioned above, sites using Google’s DFP for Publishers have a setting that enables them to outbid the highest bidder by 1 cent using Google Ad Exchange. This usually leaves Google in the position to win most auctions where they value the user.
THE BIG PROBLEM WITH THE WATERFALL SYSTEM
The main issue with the waterfall or daisy-chain system is the price your impression sells for doesn’t necessarily reflect its real value. That’s because whenever an impression is up for grabs, advertisers that have spent the most in the past get first dibs. If no one in this group goes for it, it is passed down to the second tier and so on until someone bids for it.
There may be someone in the next tier down who is ready to pay a higher price, but they never get the chance to bid for the inventory they want, leaving revenue on the table for publishers.
This is like selling a loaf of bread to four different people, one after another and lowering the price each time someone rejects it. Eventually, someone will purchase it because it’s a good deal, but they may have purchased at a higher price anyway. Furthermore, by lowering the price, you give the impression that it is poorer quality. The longer you leave the bread without a sale the less valuable it becomes.
HOW DOES HEADER BIDDING WORK?
Header bidding begins as soon as the page begins to load within the user’s browser. The header bidding code in the page header executes and calls all demand partners like Rubicon, AppNexus, and Pubmatic simultaneously to bid on this impression. All within a specific time frame picked by the publisher, often within a second.
During this split-second window, many of these demand partners are holding their own auctions to determine the top bid they send. The highest bid values from each partner are then passed from the visitor’s browser to the publisher’s ad server before its own direct inventory is called.
Header bidding means that all the demand sources are bidding at the same time and publishers can control which sources have the ability to participate in the bidding process. Most importantly for publishers, they can increase the prices they are charging for their premium inventory. Publift has seen publishers increase their revenue by an average of 70% when implementing header bidding, within our Fuse platform.
With less reliance on a single SSP, overall yield also increases, with an increased ad fill rate and a smarter allocation of impressions sold to the highest bidder.
Reporting discrepancies are also reduced with header bidding as it is a single auction. There is no sequential chaining.
Google has warned against header bidding recently, saying that the process causes latency on sites that use it. Many publishers, however, have seen decreases in latency for sites using header bidding compared to the waterfall sequence.
HOW DOES HEADER BIDDING HELP ADVERTISERS?
All advertisers now have a great shot at winning the best inventory regardless of whether they use AdX or not. It also provides better transparency for the advertiser as they are now able to access all of the publisher’s inventory and they know what’s available and at what price.
Advertisers now have access to premium inventory that was previously only available through direct deals with publishers. With header bidding, programmatic ad buyers now get a real look at all of a publisher’s impressions, not just those that went unsold in the waterfall setup.
WHAT ARE HEADER BIDDING WRAPPERS?
A wrapper, A.K.A a container or framework, is a technology used to manage all the header bidding partners a publisher wants to use. It organises all buyers and sets the rules for the programmatic auction. It means publishers can maximise the number of demand sources competing for an impression in an auction without the added complexity of added code with each new bidding partner.
It means that all partners have their bid requests triggered at the exact same time. Wrappers also have a timeout setting to manage how long the browser waits to respond before the auction closes out. Publishers can add and remove demand sources from their auctions based on their performance. If a particular demand source is not winning any impressions, they can be easily removed from the header bidding process.
GOOGLE’S ANSWER TO HEADER BIDDING
Header bidding was put in place to add more competition to Google’s ad exchange which was able to preview auctions and win impressions they valued by bidding 1 cent more than the winning price. Google has now been given less control over the process, with all demand partners bidding on the impression simultaneously.
Google has since offered its product, Exchange Bidding, as a possible alternative. Exchange bidding relies on server-to-server connections, which are faster than the page tags header bidding relies on which decreases page latency, thus increasing ad viewability and yield.
SERVER-SIDE HEADER BIDDING
Publishers can try to limit the number of demand sources that can bid in the first place, but this goes against the big benefit of header bidding. The whole point is having more people bidding to drive up the price.
Google’s ad exchange and server-side bidding, in general, tackle the latency problem by hosting the auction process in the cloud in an external server. Publishers still need to add a snippet of code to their site, but rather than sending the bid requests from the user’s browser, they are sent from the ad server to all relevant supply-side platforms (SSPs).
SO, IT’S A WIN-WIN ALL AROUND
Header bidding has been a huge programmatic technological breakthrough in the ad ops space. It has opened up the ad buying process helping publishers to have more control, more transparency and higher revenue from their inventory.
Advertisers also benefit from header bidding as they now have more access and visibility of a publisher’s entire inventory, allowing them to bid on premium inventory that was previously only available through direct sales.
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