What is header bidding, and how is it changing the AdTech environment?

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What is header bidding?

Header bidding can be explained by a simple analogy: imagine a retail salesperson trying to sell a product to its customers. In the current system, the salesperson tries to sell the product in one store at a time. If unsuccessful, he moves himself and his product to the next store to see if he has better luck. In this transition, valuable logistics are wasted, both on time and resources. Imagine if the same salesman could reference his product across multiple stores in order to see where interest lays before he physically travels there to deliver. This is header bidding, in which the salesperson (publisher) references a brief product description (header) in multiple stores (ad exchanges) in order to have it purchased at the highest price, while eliminating the need to push inventory back and forth from one ad exchange to another in search of the best deal.

 

Google’s DoubleClick for Publishers (DFP) technology monopolizes ad exchange for publishers to serve ads, and Google AdX via DFP typically does not permit third-party bids on ad inventory, essentially blocking potential external revenue sources by forcing a waterfall inventory auction system . Header bidding acts as a work around, adding coding to enable ads to be referenced in page headers across multiple ad exchanges before DFP is aware.

 

The header bidding scorecard

The Pro’s: The benefits of header bidding run under the assumption that more competition with greater transparency is beneficial for all. Publishers become autonomous and have increased transparency on a more granular level, as header bidding enables tracking bid prices on a per impression basis. Increased ad inventory visibility means an increase in overall bids for this ad space, couple this with per-impression tracking ability and publishers are able to greatly increase their yield. Also, publisher’s dependence on Google to sell their inventory is slightly reduced as the playing field of demand sources is equalized.

From a buyer perspective, header bidding lends to programmatic solutions, as the auction process no longer only falls to RTB as a last resort but simultaneously.

 

…And the Con’s: Despite its obvious benefits, header bidding can be a double-edged sword. While theoretically a publisher now can access an unlimited number of exchange partners, each additional ad exchange listing requires a tag embedded into a site’s (or app’s) header coding. With each added tag the page suffers minor slowing down of download times. Does the millisecond really make the difference? The overwhelming answer is YES in all things AdTech; that added millisecond could be the difference in whether a user continues waiting for the page to download, whether an ad impression will result in a click through…the examples are endless. While this added coding responsibility for the publishers could pose difficulties, header bidding wrappers have been developed to simplify the process. The overall effectiveness of digital and mobile advertising is partly defined by speed of delivery, and the issue of loading latency is only further exacerbated in mobile, where we must also consider data consumption and battery life. Is maximized yield worth the latency?

 

Google fights back

Clearly, however, Google DoubleClick for Publishers and its Ad Exchange monopoly are threatened by the newly opened and transparent market. Within Google nature, the giant’s first step is to innovate, opening access to Google First Look. This new service grants access to multiple ad exchanges to DFP users without the need for additional latency-inducing header coding, theoretically rendering header bidding useless. However, this service comes at a premium price and does not guarantee publishers are maximizing yield and obtaining the best price per impression. A relatively poor substitute for header bidding technology. Certain AdTech experts fear Google’s recent announcement will simply renew the cycle and enable them to once again gain monopoly in their publisher ad exchange offering.

 

Future of header bidding

Header bidding is already a widely adopted practice, with almost 70% of publishers now using header bidding technology, according to Tom Shields, SVP of publisher strategy at AppNexus. As the practice becomes more mainstream, or as mainstream as a complicated AdTech development can be, the need for publishers to pass through an SSP will diminish, driving merger and acquisition opportunities that have already begun taking place. Publishers can further exploit header bidding benefits by combining these transparent ad exchange efforts with a Data Management Platform. A DMP requires no SDK thus minimizing latency, while enabling the publisher to sell ad inventory based on more granular targeting criteria in order to achieve better yield.

 

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