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Today, the most commonly adopted method for in-app monetization is mediation. In a nutshell, mediation is a solution that lets app developers setup, manage, and optimize multiple mobile ad networks.
Mediation optimizes revenue following the waterfall model – the sequential initiation of a bid, one ad network after another until the ad is sold.
But with waterfalls, ad networks are prioritized on historical revenue data. So if a particular network starts to drive higher CPMs but is lower down the waterfall, you may never know. Meaning you’re not getting visibility on the highest bid at any one time.
This makes it difficult for mediation technology to prioritize monetization partners and means you the publisher, miss out on valuable revenue. Not good.
And when more than half of app publishers still rely on the ad waterfall model, it’s clear that a change in approach is needed. That’s where In-app header bidding is starting to rise in popularity.
What is Header Bidding (or Parallel Bidding)?
Given its origins in desktop advertising, the term ‘header bidding’ refers to the headers of web pages. Header bidding enables publishers to offer their inventory to all partners, ad exchanges, and ad networks simultaneously before making a call to their ad server. The highest price offered can be taken in real time, based on set rules on schedules and pricing.
Header bidding is now relatively mature in the world of desktop and mobile display, and is now gaining traction in-app.
Apps, of course, do not have headers. But the name associated with the technique has stuck. You may also see the term ‘parallel bidding’ (or ‘unified auction’) crop up in similar conversations.
For apps, the principles of header bidding can be applied by performing ‘parallel’ bidding via the mediation layer. Just as with web ads, the request is sent to multiple partners at the same time, and the highest bid is selected before calling the ad server.
In short, this means you don’t miss out on revenue.
Too good to be trueâ€¦?
Sounds great, right? Of course, there are a number of challenges to consider before moving to a header bidding (or parallel bidding) model. We’ve listed them below, along with a solution for each.
#1 Multiple Integrations
To make the parallel bidding model work, app developers typically need to integrate an SDK from each monetization partner they work with. If that’s six partners, that could mean six SDKs.
For smaller development teams in particular, implementing all of that can be a serious time suck. Not to mention require technical upkeep that pulls your team away from what they would otherwise be doing, i.e. iterating and developing new products.
To avoid this, make sure to use a mediation partner that can integrate all major ad networks, ad exchanges, DSPs, and campaigns on the market. The best solutions available today can do this with a single SDK, meaning you don’t have to spend vital man hours on squeezing extra code into your apps.
#2 First vs Second Price Problem
Programmatic advertising has traditionally been run on what is known as ‘second price auctions‘. Typically, this means that the winning bidder will only pay one cent over the second highest price, even if their maximum bid is in fact much higher. This leads to you, the publisher, missing out on revenue.
This discrepancy between bid price and the publisher commission (or ‘clearing price’) has led to the rise of ‘first price’ auctions. The buyer bids the price at which they value the user they hope to reach.
In a mediated auction, a second price auction could lead to the second price bid going on to compete at the exchange level. Potentially against first price auction winners. This puts second price bidders at a significant disadvantage.
Dynamic floor optimization. This process flattens the waterfall and does not rely on second price auctions. By placing dynamic floors at regular intervals, more accuracy is achieved across the bid landscape.
Make sure your mediation partner operates Dynamic floor optimization.
#3 Limited to CPM Only
As a publisher, in order to maximize your potential returns, it pays to be able to accept as many types of performance campaigns as possible. However, many header bidding solutions today currently only support CPM pricing, leaving a lot of potential revenue on the table.
The most advanced mediation partners are able to use predictive technology that can take CPI, CPL, and CPA performance campaigns and convert them into a highly accurate eCPM. This enables them to compete with CPM bids, meaning you won’t miss out. Make sure your mediation partner supports this.
So is Header Bidding for you?
In-app header bidding is fast becoming the preferred monetization method for app publishers. Recent innovations, such as dynamic floor optimization, have all but cleared up previous concerns, and are having a significant impact on publisher revenue.
It might just be time to consider jumping off that waterfall.
If you have any questions about header bidding, and which monetization options might be right for your apps, feel free to drop me a line – email@example.com
Barnaby Chapman, Senior Product Marketing Manager
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