- Header Bidding
- Header Bidding
With the advent of programmatic advertising, much of the legwork is done by algorithms. Yet, there are still many challenges associated with machine-driven ad buying. Lost profits, poor quality of ads, lower loading speed, and a lack of transparency are just a few. So far, header bidding seems to be the only actionable solution to these problems, which accounts for its popularity. In 2019, 79% of 1000 US publishers took advantage of header bidding to monetize their vacant ad placements. Yet, despite header bidding being a buzzword in ad tech talks, it is still foreign to many.
If you have no idea why “AppNexus header bidding” and “Criteo header bidding” are among the most popular Google search queries within the programmatic ad buying topic, this article is for you. Here, you’ll learn what header bidding is, what makes it better than a traditional waterfall, how it works, and its pros and cons.
As an advanced ad buying method, header bidding allows the publisher’s ad space to be offered to numerous demand partners at once. Since the mere definition of header bidding isn’t enough to understand its value completely, we will also compare it with the waterfall method, its predecessor.
Let’s say a publisher has several demand partners and one unused ad placement. In a waterfall, they are ranked based on their average historical performance. Besides, both parties agree on the price floor – the minimum price for the available ad space. When a user opens the page or application, the server calls upon the first partner in the “ladder.” If a satisfactory bid isn’t produced, the server sends a request to the next partner in the waterfall. The process repeats until someone reaches the floor.
This strategy is meant to guarantee high fill rates — the percentage of sold ad placements against the offered ones. Unfortunately, reality is not so optimistic.
For example, let’s set the price floor at $2. The first ad network bids $1, the second one — $2, and the third — $3. Since the partners are called one after another, the impression will be sold to the second ad network. This means that the impression is sold to the first network which meets the floor, even though its bid is not the highest.
As shown in the example, the price floor doesn’t always equal the highest bid. Thus, if the winning partner happens to be higher in the ladder than the highest bid, the publisher misses on the opportunity to sell their ad space at the highest price. Besides, the waterfall setup allows calling only one demand partner at a time and the process repeats until the floor is filled, which increases latency and the web page loading speed slows down. With this in mind, the programmatic advertising community needed an alternative that would allow them to monetize their products to the max capacity without compromising on the user experience. This need is where header bidding steps in.
Header bidding works like a real auction — demand partners bid simultaneously and the highest bid wins.
Here’s how header bidding works. A piece of code with several adapters is inserted in the header of the page. Each adapter allows sending a bid request to a particular demand partner. To avoid increased latency, the publisher sets the timeout (1-1.5 seconds) — the time frame within which demand partners have a chance to make a bid. Once the user opens the page, the ad server calls upon the demand partners, they bid, and the highest bid becomes the winner — all within the given timeout.
The header bidding auction runs on a user’s browser (client-side) or on an external auction server (server-side).
As shown above, higher profits for website/app owners and increased inventory options for media buyers are two main reasons why businesses are turning to header bidding for programmatic advertising. For instance, due to header bidding, The Telegraph managed to increase its programmatic advertising revenue by 70%. And though this information might be enough for you to invest in header bidding, let’s unpack additional pros of this technology.
Even though header bidding seems to be a win-win option for publishers and advertisers, the technology isn’t without downsides. Let’s explore each of them in detail.
Though the header bidding technique was invented a few years back, it continues to be the only answer to main issues associated with traditional programmatic media buying — inefficient demand source traversing, resulting in increased latency and lost profits. Besides, header bidding is proving to be an ultimate remedy for low fill rates, poor reach, less control, and numerous report discrepancies. Nevertheless, header bidding remains a controversial strategy known for complicated implementation, latency issues, and duplicate bidding.
So, which option to choose, header bidding or a waterfall? In fact, you don’t have to abandon the existing waterfall to integrate header bidding. As shown in the post, one of the pros of header bidding is its compatibility with the waterfall method. This hybrid approach when header bidding ‘marries’ a well-set-up waterfall is one of the most profitable programmatic advertising strategies as of now.