• Header Bidding

Complexities of the Header Bidding Ecosystem

Konstantin Mirin
7 Aug 2020
9 min
Complexities of the Header Bidding Ecosystem

Understand how it all fits together and what the supply chain looks like at each stop from brand dollars all the way down to the publisher.

There is a steady flow of money from the brand to the advertiser, but many stops along the way. This outlines that flow of money similar to a food chain, or supply chain as it’s known in AdTech. The demand side, starting with the brand– where all the money comes from all the way down to the publisher who has properties online and generates content to gain more users so they can show more ads and make more money. Not every single one of these stops happens every time, but it is a good general outline when thinking about how money flows from one end the spectrum to the other in the world of AdTech. Questions or comments about any of this? Let us know!

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    THE DEMAND SIDE

    Brand

    It all starts with a business who decides to incorporate advertising within their marketing budget. Simple enough, but the money allocated here will be much different than the actual amount the publisher sees at the very end of this long food chain.

    Example: Cheerios

    Purpose: Use advertising to get more customers

    $ Taken: All the money starts here, with the brand.

    Complexities of the Header Bidding Ecosystem - photo 1

    Agency

    The brand usually wants an expert opinion to help them with the complexities of advertising, so the brand decides to hire an ad agency. The ad agency then works with the business that they call a “brand” to create an advertising campaign. Within this advertising campaign, they allocate a portion of the advertising budget to digital spending. Within this digital spending, they allocate a portion of the spending to programmatic advertising. So to recap where we are, a brand gives the whole budget, or for illustration purposes, let’s call it a “pie” to the agency to manage. The agency allocates a portion of the pie to digital then programmatic, so it’s now a smaller pie. They also take a portion of the pie for management. Now a slice is gone. 

    Example: Digilent

    Purpose: Strategy, plan & manage the advertising campaign

    $ Taken: Project fee, hourly or set budget + sometimes a % of spend

    Creative

    The budget is again portioned out to create banner ads, strategy, and setup/ management time. From there the banner ads are created in the sizes they decide– sometimes even high impact units like video or gameplays. Then the agency plugs those banner ads into a DSP or Demand Side Platform. So now the agency takes another slice to do all these things. 

    Example: Creatives within the agency or an outsourced creative company

    Purpose: Create ads

    $ Taken: Project fee, hourly or set budget

    DSP

    The DSP then has the full programmatic budget plugged into the platform and the banner ads inserted.  The DSP takes a portion of spend, so another portion of the pie is taken out.

    Example: Ad Colony is an example of a DSP that offers in-app demand.

    Purpose: The DSP is a platform built specifically for ad buyers to use. It allows them to use highly advanced targeting strategies like matching the end impression being shown to a person with demographics, affinity categories, or geographical targeting that the advertiser specified that matches the brand’s target audience– that guy we started out trying to reach. DSPs are also designed to get the lowest possible price for that specific impression.

    $ Taken: Depends on the DSP– typically some unknown percentage of spend. 

    *Often on both sides

    Complexities of the Header Bidding Ecosystem - photo 2

    Viewability Vendor

    Agencies typically use some kind of viewability vendor to make sure the ad is appearing in places that are “brand safe” and that the majority of their spending is going towards placements where the ad is actually being seen (viewable) instead of paid for and never seen. Sometimes these 3rd party verification vendors are even plugged into the DSP. The viewability vendor takes a percentage of spend on each impression, so take out another piece of the pie.

    Example: Integral Ad Science

    Purpose: Track the percentage of ads in view. Sometimes it even predicts the best-performing ad slots to serve into based on historical viewability data

    $ Taken: a set CPM fee depends on the volume spent possibly around a $.05 CPM

    *Often on both sides

    Complexities of the Header Bidding Ecosystem - photo 3

    So now the ad has been strategized, created, set up and a pixel has been added to it for extra tracking– it’s only about halfway to reach the intended audience segment. Let’s keep going. Next it  

    For digital display ads, there is sometimes an Ad Server that houses the Agencies creatives and their budgets. This allows the agency to provide a single tag to the DSP, that is dynamic, and the agency can quickly and easily swap out any changes to creative, run A/B tests, or add tracking pixels or budgets. It also allows the Agency to have a nice overview of what ads are going where and which ones still need to be created. It’s as much for planning as it is the functionality of housing and serving ads. It’s also a single unified reporting platform for the agency so their metrics can verify those provided by DSPs to ensure there is nothing off with the campaign as it runs. Also sometimes known as the “single source of truth” Sometimes the DSP acts as an ad server so the Agency doesn’t need the extra layer. 

    Example: Sizmek

    Purpose: Help agencies host, track, and swap out creatives. Also great for helping agencies report and monitor their advertising in one place

    $ Taken: SAAS model typically a monthly fee of some sort

    Complexities of the Header Bidding Ecosystem - photo 4

    This is where the demand side, all that we have covered so far, meets the supply side. The supply side’s goal is to get higher CPMs because the supply side’s end customer is the Publisher who has a website and is selling inventory on the site. 

    THE SUPPLY SIDE

    Networks / SSPs/ Ad Exchanges

    The middlemen here take on many names. They basically collect inventory and parse it out to the supply side. It is almost the same as a DSP, but the algorithms are built to increase the CPMs so the publisher receives more money on the ad spaces, whereas the DSP is built to optimize for the LEAST expensive placements to meet the advertisers wish to gain many impressions for as little money as possible. Bids go out from the DSP and SSPs source the inventory from tons of networks and publishers.

    SSP have their own supply (directly integrated publishers), but also bid on the external supply – incoming from other networks/exchanges/SSPs – essentially acting to them as a DSP, but the main point is that in the center there is an exchange/auction connecting demand to supply wherever it comes from.

    Example: OpenX

    Purpose: Supply-Side Inventory

    $ Taken: % Revenue Share 

    *Often on both sides

    Complexities of the Header Bidding Ecosystem - photo 5

    From the SSPs they can be connected to 3rd Party platforms on the supply side. One such is Header Bidding platforms which collect SSP bids from multiple vendors. What makes Header Bidding valuable is this piece of the puzzle– instead of relying on one vendor to sell all the inventory, there is instead an auction that happens to compete many vendors against each other. This competition increases the publisher’s chance of getting a higher price on their ad inventory being sold. Header Bidding lies at the very end of the digital advertising ecosystem– it integrates most closely to the publisher who has Owned & Operated aka O&O properties. 

    Example: Prebid Wrapper

    Purpose: Open source software to aggregate bids from multiple supply vendors

    $ Taken: Free, but there are paid & managed wrappers available also

    Complexities of the Header Bidding Ecosystem - photo 6

    Other Networks

    Independent in-app vendors that are not RTB enabled come in here for in-app bidding. They are layered into the auction using mediation. 

    Example: Chartboost

    Purpose: More competition on the ad inventory for a chance at even further increased publisher revenue

    $ Taken: Revenue Share

    *Often on both sides

    Complexities of the Header Bidding Ecosystem - photo 7

    To manage this complex vendor auction an Ad Server like Google Ad Manager must be used. It allows everything to be in one place so the line items can compete against each other and assign a winning bid price from the highest bids sent from each SSP.

    Example: Google Ad Manager

    Purpose: Keep everything in order & run the complex auction of competing SSPs

    $ Taken: Rev Share and sometimes monthly fee depending on service

    *Often on both sides

    Complexities of the Header Bidding Ecosystem - photo 8

    Ad Quality Platforms

    Let’s be honest, no one likes malicious ads or fake traffic. That’s why companies like Confiant exist to block them. This helps the publisher because they often get penalized by SSPs and the Ad Servers if their IVT levels are too high. They also hurt when users have a bad experience on their site like getting redirects that can even inject malware onto their computer or device. SSPs want to keep Advertisers happy so they have to monitor for inflated clicks or suspicious impressions with a very low viewability or time in view. These 3rd party verification/ ad fraud blockers help keep the bad guys in check, but it gets pricy.

    Example: Confiant

    Purpose: Stop malicious ads, redirects, and invalid traffic 

    $ Taken: Sometimes monthly fee plus rev share– depends on vendor

    Complexities of the Header Bidding Ecosystem - photo 9

    Publisher

    We finally made it! The publisher is the last stop in this chain of events. They are responsible for keeping page speed very quick and having a good user experience. Both of these are key factors in how many ads per session they can generate. They also have to worry about ad maps– or layouts of their site or app and monitoring payment and payment terms. Terms can be as long as 90 days out!

    Complexities of the Header Bidding Ecosystem - photo 10

    RECAP OF MONEY FLOW

    The advertiser sets a max CPM then the DSP searches to match that through SSP inventory which sources from publishers around the globe. Throughout this process, there is monitoring by IVT vendors and platforms for reporting on both sides. It happens in less than a blink of an eye but there are many steps from point A to point B. Understanding the whole food chain helps to know why things happen the way they do and how to better troubleshoot issues. This entire flow is ever-evolving as new technology becomes requested and as innovations happen. 

    SUMMARY

    To recap, there are many stops from the brand to the point it actually gets shown to the target audience on the publisher’s side. The complex ecosystem driving digital advertising is unruly and there is no one single way to do it. There are many ways to set it up and many vendors to choose from at each one of the stops. It keeps things exciting, but also complicated. I hope this helped you understand how the money flows from the brand all the way down to the publisher. Shoot us a note if you have any questions!

    Digest of AdTech Trends 2021
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