Header Bidding: Disruptive Innovation Most Publishers Welcome
Header bidding has created quite a buzz in the advertising industry recently. But it was as far back as 2009 when the technology first showed up in the house of programmatic. The solution was originally conceived as an alternative to bypass the waterfall auction, but it’s becoming a common practice among publishers. Why are publishers rapidly shifting to header bidding, and what ‘waterfalls’ are we talking about?
It all started with a waterfall
Suppose, you’re a publisher that needs to monetize the ad space on its website. To find buyers, first of all, you refer to your ad server for the direct-sold ads. Then, you’ll most likely push the rest of the inventory to open exchanges. And here’s where the ‘waterfall’ starts.
The unsold ad space is offered to demand partners according to their buying volume, so that the top-rated ones can cherry-pick the best spots before others have even a chance to bid. If unsold, the impression is passed on to the next lower-ranked exchange until it is finally sold. Thus the big league buyers are privileged while the lower-ranked bidders — even those who would have paid more — are left on the sidelines.
Such a buying model is a three-way deadlock. For demand-side platforms, a publisher partnering with DoubleClick for Publishers (Google’s ad server) means Ad Exchange (Google’s real-time marketplace) will always outbid any other competitor. As a publisher, going from one advertiser to another and losing impressions, you miss out on a lot of programmatic revenue. Neither is user left unaffected: the longer the waterfall is, the slower the page loads.
This is why the waterfall auction in a Google dominated ecosystem has been proclaimed complicated, inefficient, and short on revenue. Nevertheless, it has long been a standard way of buying and selling ads. Until developers came up with a header bidding solution.
How header bidding works its magic
The header bidding gimmick lies in a piece of JavaScript code embedded in the publisher’s website header (hence the name). When a user visits the website and the page is loading, before calling the ad server for direct sales, the publisher refers to demand-side platforms for bids. The demand source — SSP, DSP, or ad exchange — gets a glimpse of the page inventory and sends back a dynamic bid with a price a buyer is willing to pay for a specific impression. If the value in the bid corresponds with the publisher’s preset requirements, the network with the highest bid wins and the ad is served up. The mechanism sounds complex, but the whole process hardly takes 500 milliseconds.
So what’s the essential difference between the waterfall sequence and header bidding? First of all, in contrast to the waterfall auction, header bidding allows simultaneous calls to multiple demand sources. Secondly, the latter are bidding against each other and sometimes even against the winner from the direct sales. Finally, demand side platforms are bidding for all available impressions, not just the leftovers.
How header bidding reshapes ad buying
Disclosing ad opportunities to multiple buyers at a time, publishers can see the true value of their inventory, estimate the demand and maximize revenue. Advertisers, in their turn, get better access to the right inventory and enjoy greater transparency. The solution also puts a stop to Google’s monopoly.
As a result, header bidding creates a competitive environment for guaranteed, RTB buyers, and exchanges, levelling the playing field for both demand sources and publishers while increasing the yield for the latter. Last but not least, users get ads that mean something to them.
Looks like a happy publisher-advertiser-consumer engagement. No wonder up to 70% publishers have already switched to header bidding.
MailOnline, CNN International, Trinity Mirror have all claimed their programmatic revenues have risen with the shift to header bidding. The Telegraph has increased its programmatic ad team fourfold due to a 20-percent boost of its programmatic revenue. Some publishers mix approaches selling impressions through header bidding in the first place, while resorting to the waterfall as a Plan B.
The daisy chain days are not gone yet with colossuses like The Financial Times, The Economist, and BBC abstaining from header bidding. Because however advantageous, the solution comes with its drawbacks.
The flipside of header bidding
A major concern that keeps some publishers away from adopting header bidding is that stuffing the page with multiple header bidding tags means greater risk of latency. With a slower page load, the number of impressions delivered decreases, viewability and user experience are hindered.
As a workaround for this issue some publishers reduce the number of partners or implement timeout thresholds to weed out slowpokes that fail to file the bid within the set time limit. Some publishers move to a single-request architecture, wherein every header bidder gets one request.
Another solution to the latency woe developers have come up with is a header bidding container, aka framework, or a wrapper.
Unwrapping the wrapper
Header bidding is not a plug-and-play gizmo: implementing the solution and managing multiple partners involves technical and ad operations resources. Every new partner a publisher takes on means adding extra code, whereas not all header bidding technologies perform smoothly together. Integration, adjustment, measurement — all that comes as headache for ad ops and engineering teams. Especially, when the publisher is a large media company with dozens of properties.
Wrappers were designed to solve these challenges. Instead of embedding a separate tag for each demand source, a container tag — another string of JavaScript — is placed in the header, so that publishers can update header tags without changing the website code. Containers can include tags to track analytics and viewability or set auction timeout thresholds. As a result, apart from reducing latency, wrappers enhance overall security and transparency. Altogether this facilitates the implementation of the technology at scale.
As more publishers embrace header bidding, more tech companies develop their own frameworks. Some frameworks are open-source, which means a publisher can adjust or upgrade them, but with no support provided. Some vendors charge a fee for their wrappers, some ad tech companies offer customizable out-of-the-box solutions.
Time Inc. was the first publisher to report using a header bidding wrapper across its websites including People, Sports Illustrated and Fortune. In December 2016 Amazon announced the launch of a cloud-based wrapper. Rather than handle all ad requests in the users’ browsers, the solution will move the auction to the cloud, which means less lag time loading web pages. AOL, another mass media giant, is also building its own wrapper.
Where header bidding is heading
Originally perceived as a temporary fix to the daisy chains, header bidding has quickly evolved into a must-have tool for publishers. Promoting a unified auction in a transparent and competitive marketplace, the solution offers a refined ad buying model.
The technology is changing the industry. However, it might be facing an existential challenge as more publishers start experimenting with server-to-server solutions for their video ads. Skeptics assume that server-to-server connection is actually killing the idea header bidding was primarily intended for.
Whatever the future holds for header bidding, with the disruption it has brought about, digital advertising will never be the same.
