What is Header Bidding and How it Works?
When a user visits a webpage, an impression is generated. This moment is gold for publishers because it gives them the opportunity to make some real cash. However, this ad inventory must be sold immediately; otherwise, it is gone for good.
In a publisher’s perfect reality, every impression is selling like hotcakes, turning the website into a real gold mine. But not all impressions find their perfect buyer, and they become remnant (unsold), bringing zero value to the publisher. Because programmatic was built on the streamline and, therefore, suffers from fragmentation, it’s not perfect.
No one wants to lose impressions due to the inefficiency of the system, which is how header bidding was born. Header bidding is a quick fix for publishers who want to get maximum revenue from their inventory by working with multiple ad exchanges and ad networks.
Prologue: Classical Publisher Waterfall
Historically, working with ad tags from different demand sources and preserving true liquidity was a real pain for publishers. Before header bidding, a publisher’s impression had to go through a “waterfall” or so-called “daisy chain”.
In a waterfall auction, when the impression became available, it was offered to the first-tier buyers. If nobody from the first row swallowed the bait, the impression was then suggested to the next tier and so on until someone bid on it. This was a hierarchical approach to buying and selling ads, which remained the standard for a long time. The process of ad prioritization was managed through the publisher’s ad server, which gave preference to advertisers who reserved impressions. Demand partners could compete only for unreserved impressions on a cost-per-thousand (CPM) and fill-rate basis.
Therefore, the traditional publisher waterfall did not give all programmatic partners the ability to compete simultaneously and did not optimize the inventory based on price. Publishers did not receive the true value of their inventory and had to jump from one ad network to another to sell their impressions. In the end, the impression was not always sold for the highest price, resulting in low performance and the publisher’s frustration.
Opening Shot: Header Bidding Defined
Header bidding appeared as an advanced solution for parallel auctions, which were conducted among all participating ad networks and ad exchanges synchronously. This programmatic technique allows publishers to offer inventory to multiple demand partners at the same time, which means increased competition and higher bids.
The header bidding advertising tactic is sometimes called “pre-bidding” or “advanced bidding” because the auction is relocated from the ad server into the header of the publisher’s webpage. The trick is that multiple demand partners can bid on the same inventory at the same time, letting the publisher’s supply-side platform (SSP) to determine the winning bid. The call to the ad server is only made when publisher’s SSP accepted the bid.
Episode One: How Header Bidding Works. What Is Header?
The header is an HTML element on a publisher’s webpage that acts as a storage for the introductory content (i.e., logo, icon, authorship information) or a set of navigation links. It is a string of code invisible to the end user that looks like this:
With header bidding, the impression is offered to a myriad of buyers. If nobody bids on the impression, it creates a second-price auction. Unsold impressions are passed through on and on until they are sold to the winning bidder. This programmatic solution flattens the waterfall, giving publishers more control over their inventory and generating a higher yield.
Episode 2: Advantages of Header Bidding for Publishers
Let’s have a look at some major advantages from the publisher’s perspective:
- Increased competition: Offering impression to larger number of buyers creates competition and higher CPMs. Incorporating the header bidding solution, publishers see 15 to 100 percent increase in revenues depending on the complexity of their programmatic stack and the number of bidders set up for the ad placement.
- No ad server adjustments: With waterfall auctions, demand fluctuations require constant adjustments. With header bidding, once the code is inserted into the bidder, publishers do not need to modify it unless they add a new partner to the list.
- Flattened waterfall: Publishers do not need to manage the order in which demand partners are prioritized because each of them claims the value of the impression in advance.
- Reduced discrepancies: Multilayer waterfall programmatic model is inherently latent, and rendering is quite time-consuming. Header bidding decreases the time for rendering the ad, improving the user experience.
- Improved yield management: In a waterfall sales, the value of the impression reduces over time, which is why so much inventory remains unsold. With header bidding, the value of every inventory is maximized.
- Boosted revenues: With a diversity of demand, publishers can actually increase their earnings by choosing the highest bidder among thousands of bidders. More buyers equals more cash.
Episode 3: Advantages of Header Bidding for Advertisers
Header bidding technology is not only a sweet deal for publishers but also for advertisers:
- Better viewability on available inventory: In waterfall auctions, advertisers have limited vision of what inventory is available because some of it is sold in private marketplaces or direct deals. With header bidding, buyers have a 360-degree view of all the inventory available. This creates a unique opportunity to win bids on premium inventory.
- Worldwide reach: Accessing inventory at a scale means having the opportunity to advertise to niche audiences and global markets, allowing for much more diversity for targeting potential customers.
- Ability to get market insights: Having information on what is available and how much it costs provides advertisers with complete transparency and allows understanding the real value of the targeted audience. If you're interested in the website and blog traffic monetization read this article.
Epilogue: What Does the Future Hold for Header Bidding?
Make your inventory available for hundreds of media buyers, and let them all bid on it in real-time auctions. You will be offered the maximum price for every impression, achieving 100 percent fill rates. Request more information on the SmartyAds header bidding at https://smartyads.com/header-bidding
IRINA KOVALENKO, CMO OF SMARTYADS