Header Bidding – The Step Closer to Greater Efficiency

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  • March 08, 2016
header bidding

Despite the tremendous technology backup, digital advertising is still facing some issues related to viewability, fraud, fragmentation, and some others. Even though programmatic presupposes automated ad buying and selling, there’s still plenty to cover when it comes to connecting buyers and sellers. Header bidding became the focal interest of publishers last year and is all set to become one of the most discussed and widely adopted solutions in 2016. This is largely due to the fact that it provides balance and control of the supply and demand process, and it promotes true competition, and in the end, provides better yield for publishers.

What is header bidding?

Header bidding, also referred to as advance bidding or pre-bidding, is a technique with which publishers offer inventory to multiple ad exchanges at the same time, before making a call to their ad servers.

By allowing several demand sources to bid on the inventory at the same time, publishers can increase their yield and profit. Publishers make inventory available to multiple demand sources by inserting code into the header. For publishers, more demand sources bidding on an impression means increased competition and maximized yields.

The waterfall

In order to understand the concept of header bidding, one must first understand the waterfall concept (also called daisy-chaining) – which is the sequential methodology of ad sale and insertion. In the waterfall process, the impression is offered to channels in descending order of recognized value.

If we put this in a context, it goes something like this: the publisher offers an ad spot to the first on the list of partners on the condition that the ad meets required attributes. If the first on the list doesn’t fulfill the conditions, the second on the list is asked, and so on.

In a typical waterfall setup, it’s the direct buys that go first. After that, publishers allocate their inventory to one or more ad exchanges, estimating what each ad exchange can bring. Google DoubleClick, being the dominant ad server for publishers, often leads this process.

Publishers seemed to have no other choices, but just until recently. The increasing adoption of header bidding has been marking the end of the publisher waterfall.

waterfall vs header bidding

How does it work?

The publisher puts a piece of code in the header, allowing demand sources to place bids before the ad server is called. This gives a “first look” of the available place to buyers before it is released to an RTB auction, direct sale, or SSPs. By allowing numerous demand sources to bid on the same inventory simultaneously, publishers increase their yield and profit.

Header bidding benefits

The publisher’s side

  • Passback elimination. Passback occurs when there’s no answer from the ad exchange for the request sent by the publisher, or the answer doesn’t meet the publisher criteria. Then, the same request is sent to another ad exchange. Header bidding eliminates this, thanks to the header tag integration, with which there’s a signal from the SSP that they want the impression. Moreover, the value of a single impression is transparent.
  • End of the waterfall. With header bidding, each demand partner displays how they value the impression in advance, so managing the order in which partners gain access to impressions is no longer necessary.
  • Increased revenue. Publishers end up with increased profit by saving on ad serving fees and get the highest rate for their inventory, regardless of the demand source.

The advertiser’s side

Even though its concept in essence protects publishers’ interests, header bidding comes with benefits for the buy side, primarily because:

  • It makes the marketplace more transparent, since bid requests are generated on a per-impression basis, and this allows advertisers to see the available inventory. Header tag integrations generate bid requests for each available impression, and buyers end up with better insights of the reach for any given publisher.
  • Since the inventory becomes available across numerous marketplaces, advertisers can buy impressions from different channels. Buyers can see all the inventory available out there, and can also access it from many different channels. However, this can also pose a risk, because it means that the same impression is available simultaneously on many marketplaces. Theoretically, buyers can bid against themselves on the same impression.

Current concerns

Concerns regarding header bidding revolve around the following issues:

  1. Fear of latency –  latency can indeed become an issue, but only if it’s not well managed in the setup. If there is a specific timeout limit on the header bidding tags, latency can be capped at an acceptable level. In fact, header bidding can actually improve latency, because it can eliminate long daisy-chain setups with high latency. Latency can be a problem more on the exchange side, because without a timeout setting on a certain level, providers may not be able to respond with a valid bid.
  2. Data leakage – header bidding doesn’t create any new risks by itself, and its implementation surely doesn’t pose any higher risk in this regard, compared to other exchange-driven auctions.  Data leakage is a somewhat overly inflated concern for all publishers today. If a publisher sells a huge amount of inventory to exchanges, it already exposes users to many other platforms, which can get info on each user that visited a site.

Conclusion

Publishers are competing in a highly fragmented digital ecosystem, and header bidding can be exceptionally beneficial in their fight for survival, as it offers better control of each impression, and gives them the freedom to explore the true market value of their inventory, and ultimately get the best price for it.

The beauty of today’s modern digital advertising is in its constant shifts and tremendous transformations. Keeping up with the rhythm can indeed be challenging for everyone, but it can also prove rewarding.

Header bidding leads the way into a completely new stage of programmatic efficiency, guaranteeing an outcome that will have a long-lasting effect in the industry. For starters, it will drive profit and growth for publishers, and transparency for the buy side. With all this in mind, header bidding is set to be the hottest topic in the programmatic industry this year.

Tosho Tanevski

Tosho Tanevski

As co-founder and director of marketing at Bonadza, I'm in charge of online and offline marketing in our company and I'm constantly following the changes in the display environment.

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