What Is Header Bidding?
Short answer: It’s a way for publishers to conduct direct auctions, so as to bypass the inefficiencies that keep websites from finding the best prices for their ad space inventory.
What Are The Inefficiencies?
Let’s say you’re a publisher with ad space to sell on your website. So, here’s a summary of what normally takes place in milliseconds:
Your site reaches out to its ad server to get an ad. Usually, these direct-sold ads — the ones negotiated by the site’s own sales team — are served up first to the available ad space. After all, these are the clients the site’s salespeople have handled.
Now, the rest of the site’s ad space is made available through an ad server — often Google’s DoubleClick for Publishers (DFP) — in what’s known as a “waterfall” sequence.
It’s called that because the unsold inventory is offered to the top-ranked ad exchange, and then, if it remains unsold, it goes to the second-ranked and so on.
A key factor in the current inefficiency is how these “demand sources” are ranked, which determines the order in which they are offered the unsold inventory. They are generally ranked according to such factors as their buying volume, so the biggest buyer goes first, then the second-biggest and so on.
But the biggest buyers aren’t necessarily the ones that will pay the highest for that ad space. They’re just first in line.
And then there’s the Google factor.
Many of the site publishers utilizing Google’s DFP ad server employ a setting that allows its Ad Exchange (AdX) to outbid any of the winning waterfall bidders by even a penny per CPM, because AdX gets the last bid. This is supposed to maximize yield, but it also puts AdX in a privileged position.
So you can see why site publishers might feel they’re not getting what their ad space is worth. When they utilize waterfall bidding, and when they employ Google’s ecosystem, they might not be receiving the highest price they could.
This arrangement, Index Exchange vice president Steve Sullivan told me, is “meddling with the demand.” It also meddles with the data, he said, because you can’t really tell what your ad inventory is worth.
How Does Header Bidding Remedy This?
Header bidding is a way for the website to directly solicit an essentially simultaneous auction from all the bidders.
If they want, publishers can also allow the winning bid to compete with the prices available from the direct-sold ads.
Advertisers get a shot at the best ad inventory. And this process avoids AdX’s last dibs, thus getting around Google’s domination of the ad-buying chain and giving the publisher more flexibility..
Not least, it can also lead to higher rates. Index Exchange’s Sullivan says header bidding can produce “up to a 30 percent lift in rates” for some publishers. SSP PubMatic told me that it has seen publisher gains as high as 50 percent in CPMs.