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What is Header Bidding?

The question on everyone’s lips this year is “what is header bidding?” Header bidding is a huge advance for programmatic advertising. In this brief, we’ll go through how it works, what it means for publishers, and what to look out for, so you can decide if header bidding is for you.

What is header bidding?

Header bidding is a technical optimization to programmatic advertising that enables publishers to offer their inventory to demand partners simultaneously, rather than sequentially, before sending the winning bid to their ad server.
Didn’t quite catch that? Don’t worry. Header bidding is filled with many technical elements that can get confusing. So, let’s break it down, starting with why header bidding was created in the first place.

The Waterfall Problem

For a long time, publishers have optimized their ad revenue by prioritizing their demand sources in a cumbersome waterfall structure. In this setup, publishers create a set of rules in their ad server that offer each impression to the publisher’s demand sources in a specific sequential order: first to direct deals, which may or may not recieve the request due to pacing rules, and then to their non-guaranteed placements, such as PMPs, ad networks and exchanges. Each source is prioritized based on the floor price set for it by the publisher.
Ad Zone with Waterfall Ad Stack
In a typical waterfall setup, publishers are beholden to the price floors they have set for that given zone. In this scenario, the first partner in the waterfall did not return a bid above the price floor of $2.00, so the request is passed back to Ad Network B, whose returned bid is above the price floor and thus wins the auction. Because the other partners in the stack are not called, publishers do not see bids from all of their partners and can thus miss out on potentially higher bids from partners further down in the stack.

A waterfall setup enables publishers to increase yield, but it has several drawbacks:

  • Waterfalls leave money on the table – You have to guess the right way to order your different ad networks and exchanges. Because of this, publishers sometimes sell impressions to one partner, when another partner lower down the waterfall might have paid more. For those who use Double Click for Publishers (DFP) and its Dynamic Allocation feature, this can often be a problem. Dynamic Allocation enables ADX to win against any line item by paying only $0.01 above the line item’s floor price. This can increase fill, but also means the publisher may sell the impression to ADX without knowing if any other partner would have paid more (see figure below).
  • They require a lot of manual work – To get the best out of a waterfall setup, you need to create and manage complicated targeting rules, passbacks, and deal with the overhead of line items.
  • Waterfalls can create discrepancies – Waterfalls often involve multiple calls and passbacks between your site and your partners. Given the way ad serving works and with a high enough volume of traffic, you and your advertisers’ ad servers may have different figures for the number of served ads. If the discrepancy is big enough, then time and money has to be spent to reconcile the difference.
  • They need constant attention – Because advertisers’ buying strategies frequently change, you must constantly monitor your ad server and re-sequence your demand sources in an attempt to maximize revenue. By offering a different way to manage your ad stack, header bidding overcomes many of the issues associated with waterfall structures while still maintaining its benefits.

Waterfall with Dynamic AdX
With dynamic allocation, ADX sees the returned bid from Ad Network B at $2.50 and then wins the auction by bidding only $0.01 above the winning bid.

What is header bidding?

Header bidding removes many obstacles by providing publishers with real-time bid prices from all partners. Header bidding…

  • Maximizes ad revenue – With header bidding, you can compare real bids from all of your demand sources at once, so you are always selling the impression to the highest bidder. This means ADX has to bid and pay against real bid prices, as opposed to only paying a cent above floor prices.
  • Gets ads on the page faster – Because your site receives all bid responses simultaneously, and all the responses contain creatives, ads load on the page faster when compared to a waterfall setup an/or multiple passbacks.
  • Requires less guess work – Again, since you are receiving all the bids at once, you no longer have to guess the right way to prioritize your demand sources.
  • Reduces manual work – While header bidding requires some initial setup, the publisher no longer needs to constantly monitor and reorder their ad stack to maximize revenue.
  • Lower discrepancies – Header bidding removes the need for passbacks, which reduces the discrepancies between your site, your ad server, and your partners.
  • Better reporting – With header bidding, your ad server logs actual prices, so the publisher has better insight into the fair market value of their inventory and can accurately adjust their monetization strategies in response.

Example Ad Zone with Header Bidding
Through code placed in the header of the page, header bidding requests and receives bids to and from all ad partners simultaneously. This removes the need to prioritize partners based on estimates and guesswork and ensures that publishers get the highest possible price for their inventory at every request.
Header bidding achieves the above benefits through the use of Javascript tags in your site header. Depending on how header bidding is implemented, when a user visits your website each tag makes an ad request to your partners and waits for the response before allowing access to the publisher’s ad server. Both the request and the response can be for all the placements on your page. The partner’s responses will contain both a bid and the associated creative, and the winning bid value is passed to your ad server (typically as a key-value pair in the case of DFP). This enables your ad server to target the appropriate line item and serve the correct ad using the creative sent with the winning response.

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