• by Tim Sims , Op-Ed Contributor, May 23, 2016

I get a lot of questions from clients and partners about header bidding: What is it? Are we doing it? What value does it add?

To summarize: header bidding is enabled when a publisher places code, provided in most cases by a supply-side partner (SSP), in the page header. This code activates a request for bids from all demand-side platforms (DSP) before calling the publisher’s ad server.  Think about it as a “pre-auction.”

This implementation, and some of the philosophy behind it, are all in response to inefficiencies in the way that sell-side decisions occur in most publisher ad-serving systems.  Mass migration to header bidding in the publisher community and some swift product responses from SSPs indicate one thing to me:  This direction we are heading -- no pun intended-- has some benefit to the ecosystem. But we have some work to do to realize the full potential.

The core benefit to header bidding is creating a more unified auction for each impression, through which direct demand competes more readily alongside auction-based demand.  The theory being: More competition is better for everyone.

Taking a step back, sell-side decisions are typically made in sequence: Do this, then do that.  This is the aforementioned “waterfall.”  Header bidding increases competition for each impression, opening up a more effective avenue for auction-based bids to participate higher up in the food chain.

Climbing the waterfall

There are quite a few unique aspects to header bidding.  For buyers, we now often see requests for 100% of the publisher’s inventory, and to more effectively compete on price at higher priority in the publisher ad server.  Depending on the publisher’s implementation, programmatic buyers can effectively climb to the top of the waterfall and compete alongside direct demand with their auction-based bids.  This opens up a whole new world to the buy side.  Not only do we have an improved ability to forecast available inventory, but we can also start to compete for every single impression.  These are foundational pieces of the unified auction.

On the publisher side, each seller effectively has no limit to the number of partners that they can add to their header line-up.  Nuances and latency concerns aside, one immediate benefit to sellers is increased competition for each impression, leading to improved yield.  Publishers benefit through higher CPMs, and advertisers get access to more inventory.  This happens because supply isn’t locked into delivering direct-sold inventory when someone on the open market might bid higher, revealing the impression’s true value.  

Rather than calling demand sources individually based on a predetermined priority line, publishers can solicit demand simultaneously from each of their header partners.  DSPs automatically participate because all of the set-up work is done on the sell side.

In this case, what’s good for publishers is good for the entire programmatic ecosystem, because it allows everyone involved to discover the true value of an impression.

Header-bidding concerns to keep in mind

Because it’s up to the publisher to implement, an early argument against header bidding was that it was too complex to code and keep organized. Header bidding wrappers quickly emerged to help publishers standardize, reduce the workload on a publisher’s ad ops team, and bring SSPs more easily into the fold as a partner.

Lastly, one common complaint on the buy side is that there is no differentiation between header-enabled requests and open-market requests.  The lack of a signal to the buyer creates challenges for DSPs to effectively value those impressions.

As always, the marketplace will likely course-correct, as the aforementioned challenges continue and as new roadblocks emerge. Header bidding is the first step toward the preferred end state of programmatic advertising: a fully transparent marketplace where buyers have access to all classes of supply, sellers are able to maximize yield, and everyone gets to truly compete for each impression.  Although other speed bumps will likely develop, the bulk of ad placements will eventually transact through auctions.

Header bidding represents major progress toward this end state. Though it offers publishers the most immediate benefits, buyers have a major stake in the long-term success of a unified auction.