by Nima Wedlake on January 12, 2017
As investors in the digital advertising space, we closely track emerging technologies that impact how media dollars flow between advertisers and publishers. Header bidding emerged as such a technology in 2016 — it has been embraced by publishers and inspired a spirited discussion within the industry on its benefits and potential drawbacks.
So what exactly is header bidding? In short, it is a technique wherein publishers offer inventory to multiple ad partners simultaneously before making calls to their ad servers by placing code in the header (hence the term) of their webpages. This allows all demand sources to compete side-by-side for a given ad impression, which increases bid density and ultimately yields higher CPMs for publishers. We’ve created a report detailing the mechanics of header bidding, which is embedded below and can be downloaded directly here.
The concept of header bidding has been around for several years — Amazon and Criteo have a history of working directly with publishers to access inventory through the header. Over the last 12 months, however, we’ve seen much broader adoption of header bidding by publishers as a means of connecting to demand partners.
What prompted the change? Publishers who have implemented header bidding report significant revenue gains vs. a traditional waterfall ad server setup. It’s due to a small, but critical change to how demand partners are called to bid on a particular ad impression. In a header bidding setup, partners are called simultaneously, meaning each partner has a shot at bidding on a given impression. In a waterfall setup (common in most publisher ad servers like Google’s Doubleclick for Publishers), publishers are called sequentially until an acceptable bid amount is placed. We’ve illustrated each setup below:
The waterfall model is inherently inefficient, as ad partners who may have provided winning bids are often not called to participate in an ad auction. The resulting revenue gains from header bidding can be significant — publishers report advertising yield improvements of 10% to 70%, according to Business Insider. It’s no surprise then that the many publishers have rushed to implement the technology. We analyzed the top 100 hundred media publications in the U.S. — 69% of these publishers had at least one header bidding partner integrated.
We expect more publishers to embrace header bidding in the coming year, especially as technology providers develop solutions that streamline the implementation and management of header setups.