The Ogury guide to header bidding

February 15, 2023

Header bidding has become a major talking point within the world of digital advertising. It is a more modern and publisher-friendly programmatic auction when compared to the traditional waterfall method.

Header bidding allows publishers to offer their ad inventory to multiple demand sources simultaneously. This promotes healthy competition and ensures they receive the best possible price for their inventory. 

What is the waterfall method?

Waterfalling, also known as daisy chaining, is an advertising technique used by publishers to sell ad inventory. With the waterfall method, publishers offer their inventory to ad buyers in a predetermined order and set the priority for each potential buyer.

Publishers will first attempt to sell their inventory via direct-sold campaigns. If the impression is not filled, it goes to a private auction of select advertisers known as a PMP (private marketplace). If the impression is still not filled then the bid goes to the open exchange.

The inventory is then passed down the exchange sequentially in order of priority and once the price floor is met, that advertiser wins the impression. The name ‘waterfall’ comes from the manner in which the impression flows from top to bottom.

However, this method of ad serving is slow, and inefficient, leading to missed opportunities for both advertisers and publishers. Publishers miss out on the opportunity to receive a higher price for their inventory, and advertisers further down the waterfall don’t get the chance to bid on the inventory they wanted. As a result, the price an impression is sold for often does not reflect its true value. 

Publishers and advertisers needed a new auction process that allowed ad buyers to bid on inventory simultaneously. This need led to the development of header bidding. 

Web header bidding

In 2015, publishers began to implement header bidding as a way for multiple demand sources to simultaneously bid on their inventory. This form of real-time auction creates healthy competition from bidders and maximizes revenue for publishers. Web header bidding can also be referred to as pre-bidding.

Client-side vs server-side header bidding

Client-side header bidding begins once an ad request is initiated by a user clicking on a webpage. 

A snippet of JavaScript code known as a wrapper then initiates an ad call to all the publisher’s demand partners.

All bids are submitted simultaneously and returned to the publisher’s ad server. The highest bidder wins the auction and impression.

The whole process takes place in a fraction of a second and instantly displays the winning bidder’s creative to the user.

Server-side header bidding differs as bids are sent directly from the ad exchanges to the publisher’s server rather than to the users’ browsers. 

A single request is sent from a publisher’s server to multiple ad exchanges simultaneously.

The exchanges respond with their bids and the publisher’s server selects the winning bid.

The winning bid is then displayed to the end user.

What about in-app header bidding?

The base principles of web header bidding extend to in-app, however, there are some notable differences. As the name suggests, in-app header bidding concerns the buying and selling of ad inventory within mobile applications. Mobile app monetization has in recent years become a revenue goldmine, particularly within the mobile gaming market.

As of December 2022, PUBG mobile has generated over $9 billion since its launch in 2018. As the game is free to download, the vast majority of this revenue comes from in-app advertising and in-game microtransactions. 

While web header bidding begins with an embedded piece of code in a web page’s header, this is not the case with In-app header bidding. Instead, the ad call is initiated by the app’s built-in software development toolkit (SDK). In-app header bidding provides a transparent method of buying ad inventory where the highest bidder always wins. This ensures that publishers get the best possible price for their inventory.

Publisher benefits of header bidding

Maximized revenue: Header bidding allows web and app publishers to offer their inventory to more ad buyers which results in more competitive bidding and higher prices for publishers.

Transparency: Header bidding provides greater visibility for publishers as they can see all bids from demand sources in real time which can help alleviate fraud. Additionally, as all bids are visible, publishers can see exactly how much advertisers are willing to pay for each impression. 

Control: Publishers have more control over the demand sources they work with and can set their own custom rules for how bids are evaluated. They can also determine the price control on how low the impression can be sold for–known as the price floor. 

Better ad-fill rates: Publishers are more likely to fill their ad inventory when it is offered to multiple demand sources at the same time

Less manual work: In the aforementioned waterfall method, publishers need to periodically optimize their waterfall by amending demand sources

Increased performance: Header bidding reduces the time between the sale of an impression and an ad displaying for users. This leads to a more positive user experience and helps improve page SEO.

Why choose header bidding?

Header bidding is a powerful tool that has helped alleviate many of the grievances experienced with the waterfall method. It has helped to revolutionize the manner in which ad inventory is sold and has resulted in a more fair and transparent bidding environment. 

We recently announced our partnership with AppLovin MAX and Amazon TAM. These partnerships allow us to provide publishers with unique qualitative demand in a transparent and safe auction environment. Follow the link to discover how you can maximize your revenue and centralize your consent management through Ogury Exclusive Demand and Choice Manager.

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