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Back to Basics: What is Header Bidding?

November 8, 2017

In the never ending talk soup of the AdTech ecosystem, our vocabulary doesn’t seem to stay stagnant for long. One hot buzzword on everyone’s lips these days is header bidding. In this edition of our Back to Basics series, we’ll break down what exactly header bidding is, and why it is important to care about.

What is Header Bidding?

Header bidding is an advanced programmatic advertising technique that serves as an alternative to the Google “waterfall” method. Header bidding is also sometimes referred to as advance bidding or pre-bidding, and offers publishers a way to simultaneously offer ad space out to numerous SSPs or Ad Exchanges at once.

Normally, when a publisher is trying to sell advertising space on its site, the process for filling inventory goes something like this:

First, your site reaches out to your ad server. In general, direct-sold inventory takes precedence over any programmatically sold options. Next, available inventory is served through the site’s ad server, such as Google DoubleClick in a waterfall sequence, meaning unsold inventory is offered first to the top-ranked ad exchange, and then whatever is still unsold is passed along to the second ad exchange, and so on. These rankings are usually determined by size, but the biggest ones aren’t necessarily the ones willing to pay the highest price. (For publishers, this means lower overall revenue if the inventory isn’t automatically going to the highest bidder.)

To further complicate the process, sites using Google’s DFP for Publishers has a setting that enables them to outbid the highest bidder by a penny using Google Ad Exchange (AdX). And since AdX gets the last bid, they are generally in a position to win most of these auctions.

Publishers end up feeling like they aren’t making quite as much money as they would without Google meddling in the bids.

How Does Header Bidding Help Publishers?

Header bidding is a way for publishers to have a simultaneous auction from all the bidders, rather than the sequential strategy that Google uses. By placing some javascript on their website, when a particular page is loaded, it reaches out to all supported SSPs or ad exchanges for bids before its ad server’s own direct-sold inventory is called. Publishers can even choose to allow the winning bid to compete with pricing from the direct sales.

So what does this mean? There are a few benefits for publishers:

  1. Increased Control:  Header bidding means 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. They retain control over their sites. And publishers can take this control one step further to prioritize certain advertisers in the auction, which could encourage marketers to continue to work with their favorite publishers.
  2. Increased Revenue: More importantly for publishers, they can increase the prices they are charging for their premium inventory. Some publishers have increased revenue 30-50% with header bidding.
  3. Improved Yield: With less reliance on a single SSP, overall yield increases, by allowing for a smarter allocation of impressions and increased fill rate.
  4. Reduced Reporting Discrepancies: As header bidding is a single auction happening across multiple partners simultaneously, there’s no sequential chaining, which drastically reduces reporting discrepancies. They will always exist, but this is one step forward to reducing them as much as possible.

How Does Header Bidding Help Advertisers?

  1. Disintermediation: All advertisers have a great shot at winning the best inventory regardless of if they use AdX or not. Everyone has equal access!
  2. Transparency and Better Inventory Header bidding gives advertisers access to all the publisher’s inventory, so they know what’s available at what price. Advertisers can then bid high enough if they really want that premium inventory.

The Case Against Header Bidding

  1. Increased Latency: Google has been outspoken against header bidding recently, saying that this process causes latency on sites that use it. On the contrary, many publisher platforms have actually cited a decrease in latency for sites using header bidding compared to the waterfall sequence of Google.
  2. More Work for the Publisher: For some publishers, ad ops teams may be hesitant to adopt header bidding as it requires changing code on their site.
  3. Increased Infrastructure Costs: Another potential drawback of header bidding would be the possible increased infrastructure cost for SSPs/DSPs, as it puts more load on their server simply because they now possible can see the same impression twice.

In the never-ending quest for increased transparency and control over data and ad impressions, header bidding has become an interesting strategy. While it still proves to be a controversial method, many publishers have begun to embrace it for the promises of increased revenue and yield. What does the future hold for header-bidding? Only time will tell, but we do hope this helps in alleviating some of the confusion around its benefits.

Want to get back to the basics on some other topics? Check out a few of our other educational articles:

Back to Basics: What is First-Party Data

Back to Basics: What is Audience Enrichment

Back to Basics: How Does a Data Exchange Work?

Back to Basics: What is a Target Market?

Back to Basics: What is Lookalike Modeling?

Back to Basics: What is Data Onboarding?

Back to Basics: What is Semantic Classification?

Back to Basics: What is Boolean Logic?

Back to Basics: What is Second-Party Data?