Header Bidding: Maximizing Revenue and Ad Efficiency in Programmatic Advertising
Programmatic advertising has become a game-changer in the advertising industry as it has been able to completely reshape the way brands connect with their target audiences. It’s impossible to imagine working without it. As it’s based on data-driven decision making, it can provide actionable insights, and being automated, it’s simpler than ever for marketers to find the people they want to target with their content at the right time, in the right place. Advanced algorithms, real-time bidding, sophisticated targeting capabilities, etc. – all of these key aspects of programmatic advertising have become very familiar to us.
With that being said, we have to acknowledge that this type of advertising isn’t perfect and still comes with some drawbacks that marketers often struggle with. It can often be difficult to determine the quality and value of the ad inventory, which throws up a number of issues to do with transparency. There’s also the problem of complexity, and even though programmatic advertising is supposed to be automatic, the various issues related to multiple platforms, standards, methodologies and so on, can make the whole process dependent on expert experience, which often causes confusion.
There is now a solution for these issues which makes the work of marketers in various industries around the world easier, and helps them get the maximum revenue for their ad inventory. This fix is called header bidding. It’s no exaggeration to say that header bidding is going to change the way that marketers work with all industry players, and is bound to make their jobs much simpler too.
In this article, we’ll outline everything you need to know about header bidding, why it’s so important to the advertising industry, and what its most essential functions are. We’ll cover its benefits, potential complications, and outline how you can use it to maximum effect. By the time you’ve finished reading, you’ll emerge with a comprehensive understanding of this open bidding format, one that publishers are welcoming with open arms.
What is Header Bidding?
“At its core, header bidding is an advanced programmatic advertising technique employed by publishers to optimize the monetization of their digital ad inventory. It is a modern alternative to the traditional waterfall auctions model of supporting ad servers, designed to improve competition and maximize revenue potential by allowing multiple demand sources to bid simultaneously for available ad impressions. As such, it offers numerous advantages for ad servers, open bidding, and much more.
What is the waterfall auctions methodology, aka waterfall auctioning or daisy chaining? It works as an effective technique for publishers to optimize the sale of their remnant ad inventory. It came about in the early days of digital advertising where publishers primarily focused on selling their premium ad inventory through direct deals, which yielded significant revenue and attracted prominent advertisers.
However, there remained a portion of ad inventory that proved less enticing to direct buyers, even via open bidding. As a result, the concept of programmatic waterfall auctions was conceived to efficiently monetize these less desirable impressions.
We’ll cover the differences between header bidding and the waterfall auctions method later on. What’s important to remember right now is that the ‘header’ refers to the code located in the header section of a website’s or mobile app’s source code. This code initiates the ad call and triggers the bidding process. When a user visits a webpage or opens an app containing ad space, the header sends out a bid request to various demand sources, which typically include ad exchanges, supply-side platforms (SSPs), demand-side platforms (DSPs), and other advertising networks.
Previously, when visiting a website, priority would be given to the publisher’s direct orders, which were seated at the highest level in the ad server. Following the exhaustion of the frequency cap on these direct orders, the ad server would then proceed to pass the impression down to the programmatic line items. As such, it would adhere to the waterfall auctions method.
The problem with this approach was that the price at which impressions were sold often failed to accurately reflect their true value. Unsold inventory from the top-ranked ad exchanges, primarily determined by size rather than the highest bidder, was made available. When the inventory remained unclaimed, it was subsequently passed down to the second tier, continuing the process until a suitable bidder emerged.
The introduction of programmatic header bidding seeks to address these limitations by enabling simultaneous, multi-platform auctions and open bidding. This allows multiple demand sources to competitively bid for ad impressions, leading to improved efficiency and fairer valuation of ad space. It marks considerable progress in the ad tech industry as it empowers publishers to optimize revenue streams and advertisers to achieve more targeted and effective campaigns.
What’s the Difference Between Waterfall Auctions and Header Bidding?
The first thing that should be said about the traditional waterfall auctions model is that demand sources are prioritized hierarchically, often leading to inefficiencies, lower fill rates, and potentially reduced revenue for publishers. On the other hand, header bidding empowers publishers with greater control over their ad inventory via open bidding, provides advertisers with enhanced access to valuable impressions, and fosters a more efficient and competitive ecosystem in the programmatic advertising landscape.
Let’s break down the key differences between header bidding and the waterfall auctions methodology in more detail;
Technology: The waterfall auctions system only offers sequential impressions whereas header bidding impressions are offered simultaneously, making the process more efficient.
CPM: In the same way as the point about technology, impressions are sold at the CPM price floor using waterfall auctions, whereas CPM is higher using header bidding thanks to real-time auctions.
Control: Finally, unlike waterfall auctions, where you can only exercise a small degree of control over ad performance analysis, with header bidding, you can use bid-level reporting data to maximize your gains.
The waterfall auctions method certainly had its advantages, but its important to remember its significant drawbacks. Publishers often experienced low yield due to the way SSPs and ad networks handle impression bids. The conventional approach involves a sequential bidding process rather than in real-time, where bids are submitted simultaneously.
Consequently, high-paying advertisers were unable to bid more competitively, ultimately reducing publishers’ revenue potential. Furthermore, this lengthy process resulted in high page latency, negatively impacting the user experience and potentially driving away valuable traffic. As such, with the sequential selling process exacerbating issues with discrepancies between impressions, an alternative had to be found.
In addition, the sequential selling process exacerbates impression discrepancies when compared to a single auction system with open bidding, such as header bidding. With this type of bidding system, there is a unified auction that allows multiple demand sources to bid concurrently, leading to better pricing efficiency and increased revenue for publishers.
How Does Header Bidding Work?
With this form of bidding, users can exploit a unified auction that allows multiple demand sources to bid at the same time, leading to more efficient pricing and increased revenue for publishers. The bid request contains essential information about the user, such as their browsing history, demographics, and device type, as well as details about the webpage or app content and the available ad slot.
This header bidding data helps the demand sources determine the relevance and value of the ad impression to their advertisers, which allows them to assess whether they have an appropriate ad to display to the user via various factors. These can include the user’s characteristics, the context of the webpage or app, and the targeting capabilities of their advertisers.
Based on these considerations, each demand source responds to the header bidding bid request with a bid, which represents the maximum amount they are willing to pay for that specific ad impression. The bids collected from all the demand sources are sent back to the publisher’s ad server in real-time, then the ad server conducts a unified auction, considering all the bids received and selecting the highest among them. The demand source associated with the winning bid is notified, and their ad creative is delivered to the user’s device, displaying the advertisement in the available ad slot on the webpage or app.
The end result is header bidding, a programmatic advertising system that combines inventory into a single server-side supply, allowing publishers to sell their inventory on a per-impression basis. SSPs were supposed to address these challenges, but as SSP represents a distinct business competing with others, demand sources became increasingly fragmented. Now, thanks to the adoption of header bidding, there is a good chance that this issue will be considerably mitigated.
What are the Benefits of Header Bidding?
As is hopefully becoming clear, there are a number of key benefits to using header bidding in programmatic advertising. Publishers can take advantage of a considerably increased yield, and they don’t need to rely as much on SSPs, while advertisers can have improved access to a premium inventory. So let’s take a more detailed look at the benefits header bidding offers, point by point.
Increased CRM
We already alluded to CRM being a notable advantage of header bidding, but it’s certainly worth going into specifics. As this technique focuses on securing the maximum bid possible for each impression, instead of just grabbing whatever comes by, the programmatic advertising system is more focused on quality rather than quantity.
If bidders were once lined up in a queue and had to settle for first-come, first-served, now they can just bid for the place that they want via open bidding. This is beneficial for publishers, and it has already led to some pretty remarkable growth figures, which will enhance competitiveness across the market.
Improved Inventory Management
Header bidding empowers publishers to manage their ad inventory more efficiently and intelligently. By receiving real-time bids from various demand partners before selecting an ad server, publishers can optimize their ad space and maximize revenue potential.
This process allows them to make informed decisions based on historical bidding data, viewable impression rates, and performance metrics, ensuring ads are placed in the most lucrative positions on their websites. As such, the entire process is made significantly more efficient and effective.
Increased Transparency
Thanks to open bidding, header bidding promotes a more transparent ad auction process for both publishers and advertisers. Publishers gain access to valuable bidding data from multiple demand partners, allowing them to gain insights into how various advertisers value their ad inventory.
Armed with this information, publishers can make data-driven decisions about pricing, ad placements, and demand partner relationships. Advertisers also receive feedback on auction outcomes and campaign performance, helping them refine their strategies and identify targets more productively.
Premium Inventory Access
For advertisers, header bidding opens the door to premium ad inventory across multiple high-quality publishers. This means advertisers can reach their desired audiences on reputable websites, ensuring better ad visibility and higher chances of engagement.
Access to premium inventory improves ad targeting, leading to more relevant ads and higher conversion rates. Advertisers can therefore maximize their return on investment by precisely reaching their target demographics, and placing ads in environments that align with their brand objectives.
Improved Data Gathering
Header bidding yields an extensive volume of valuable data and allows the user to vend each impression independently. Thanks to open bidding, the sheer multitude of bids received for each impression can support the aggregation of bids for specific inventory types, which can, in turn, help establish floor prices.
Publishers and advertisers can gain a better understanding of their audience using this data and can tailor campaigns more successfully. The effectiveness of data-driven decision-making in header bidding means marketers can move towards a more sophisticated advertising landscape, securing improved ad servers.
Improved User Experience
Header bidding’s efficient ad delivery and reduced latency lead to a better overall user experience. That’s because websites that utilize header bidding load ads faster and display relevant content, resulting in a smoother browsing experience for users.
As a result, users are more likely to engage with ads that load quickly and are pertinent to their interests, leading to higher click-through rates and improved ad performance. A positive user experience benefits publishers by increasing retention and fostering a favorable perception of both the publisher’s website and the advertisements displayed.
Equal Opportunity
Header bidding fosters fair competition among demand partners via open bidding, giving all advertisers an equal opportunity to bid on ad impressions. Unlike the traditional waterfall auctions model, where larger demand partners often receive preference, header bidding ensures that bids are considered simultaneously.
This equal opportunity environment allows smaller advertisers or niche market players to compete on a level playing field with larger, more established brands. As such, publishers benefit from increased competition, potentially higher bids, and a diversified pool of advertisers.
Customized Control
Header bidding provides publishers with greater control over their ad inventory and demand partners. Publishers can set minimum floor prices, prioritize specific advertisers or ad formats, and control the number of ad calls made during the auction process.
This flexibility allows publishers to fine-tune their ad server strategy and maintain a healthy balance between maximizing revenue and providing an optimal user experience. Publishers can then establish direct relationships with preferred demand partners and gain more autonomy in managing their ad space, leading to more efficient and profitable advertising.
What Challenges Exist With Header Bidding?
Despite its advantages, header bidding comes with its share of challenges that publishers and advertisers need to plan for. For example, implementation can be complicated, with the primary issue lying in its potential impact on publishers’ page load times, so introducing each SSP tag on a publisher’s page introduces additional latency.
Publishers already struggle with sluggish pages due to the proliferation of third-party ad tags, alienating readers and prompting the adoption of ad blockers. Finding the right balance remains paramount for publishers seeking to optimize revenue while preserving user experience with header bidding.
Effectively addressing this issue requires you to tackle the abundance of elements within the header. Publishers’ success hinges on the speed at which their pages load. Consequently, optimizing load times is essential as it will ensure you can provide a seamless user experience and represents a crucial step towards making the most of your header bidding strategy. Remember, when it comes to header bidding, streamlining processes and mitigating potential latency are absolutely key for those looking to thrive in this market.
You also have to bear in mind how SSPs and exchanges leverage cookie synchronization with publishers to identify users on their websites. Through client-side header bidding, SSPs gain access to users’ browsers, allowing them to collect matching data and synchronize it with publishers’ information. This process enables the successful operation of targeted and retargeted ad campaigns, proving lucrative for both publishers and advertisers.
Challenges also arise when calls transition from the server side as the mapping of cookies becomes more complex, necessitating SSPs to match IDs both within their own bids and then with the publishers. As additional ID synchronizations occur, the mapping process further complicates, and without matching cookies, impressions lose their value due to reduced data availability. To optimize results and enhance revenue generation, addressing these cookie mapping issues becomes imperative if you use header bidding, as it will allow you to avoid a drop in revenue as the potential of each impression diminishes.
Header Bidding – The Best Practices
Do not let the challenges outlined above put you off using header bidding as no system is perfect, and the benefits that it offers clearly outweigh its drawbacks. Header bidding is advanced programmatic advertising that is proven to work, especially when you follow the essential practices that will ensure your success. Let’s examine these in more detail.
Ensure Legislative Compliance
Collaborating and communicating with mobile ad partners and vendors demands strict adherence to mobile privacy and data regulations, especially when it comes to header bidding. Key regulations to consider include the General Data Protection Regulation (GDPR) in the European Union, the California Consumer Privacy Act (CCPA) in the United States, and the Personal Information Protection and Electronic Documents Act (PIPEDA) in Canada.
You must ensure that both you, your partners, and your vendors adhere to these requirements. All involved in the header bidding process must have the necessary consent, disclosure, and security measures in place to align with the respective regulations.
Ensure Proper Demand Valuation
The inclusion of multiple partners fosters healthy competition, but it can impact the ad’s load time. Therefore, when using header bidding, it’s crucial to identify the most valuable demand partners while assessing the optimal number of associates to maintain a seamless user experience.
To strike the right balance in header bidding, consider partners’ bidding frequency and their success rate as the highest bidder, which will help determine the most efficient allies in driving revenue while minimizing load time disruption. Regularly monitoring and fine-tuning this process will enable you to maintain an ideal equilibrium between competitiveness and loading efficiency.
Consistently Monitor Data
Continuous monitoring and optimization are essential when it comes to header bidding, as leveraging the valuable data and insights it generates is at its core function. Analyzing campaign performance must be your priority so you can identify successful elements and areas needing improvement.
Conduct tests with diverse variables such as ad formats, placements, creatives, messages, and target audiences to help determine the most effective combination aligned with your objectives. Emphasizing this ongoing cycle of analysis, optimization, and communication is key to maximizing the return on investment and maintaining strong partnerships during the header bidding process.
Follow these best practices, and you will be able to ensure that your header bidding is a success across the board.
