Header bidding has been in the headlines for the past several years. Introduced in early 2009, today it is estimated that approximately 70% of publishers have adopted pre-bidding header bidding technology and have header bidding setup on their websites and apps . But not everyone who uses a header bidding wrapper on their website fully understands what header bidding is, how header bidding works, and the key advantages and disadvantages of using header bidding for both standard and premium inventory. So if you’re looking to have header bidding explained, you’ve come to the right place. That’s what we’ve set out to do in this piece—explain header bidding in a way that all publishers, demand partners, and other header bidding partners can understand.
What is header bidding for publishers?
The best way to understand header bidding and the header bidding process is to understand how it developed and why it was created.
How things worked before header bidding
Before header bidding, publishers sold their ad inventory by connecting to several SSPs that were defined in the publisher’s ad server. Every time a user visited a web page, the ad slots would initiate ad calls for that ad inventory. Since in this scenario the publisher’s ad server connects to the SSP, the SSP would connect with their demand partners and generate bid requests. The demand partners who submitted the highest bids would have their ad inventory displayed on the user’s browser in the ad space, and the relevant publisher would collect the ad revenue.
This whole process took place in the ad server. 97% of publishers work with a Google Ad Manager account (GAM), which is extremely popular because it includes a free version for small publishers that can be upgraded as they grow. That meant that for almost all publishers, the entire exchange bidding process took place on a Google ad server as part of Google Ad Exchange, the top-ranked ad exchange on the market. Google Ad Manager has a setting that allows Google Ad Exchange to outbid any of the winning bidders because it gets the last bid. Before header bidding, this gave Google Ad Exchange an unfair advantage over other demand partners in exchange bidding.
Conflict of interest impacted ad revenue
The problem was that Google was both providing the infrastructure for the exchange bidding process and was also the biggest SSP on the market with its own ad exchange and ad server. This created a clear conflict of interest since Google essentially had access to all of the info about other ad exchanges, allowing it to outbid all competitors at a minimum price and minimizing the ad revenue publishers could earn from demand partners for each ad impression.
Looking to create a more transparent ad marketplace and get around Google’s open bidding advantage, the big ad tech companies created pre-bid header bidding creating a fair playing arena for multiple demand partners.
How does header bidding change the calculation?
It works like this. Publishers insert programmatic header bidding code, also called a header bidding wrapper, directly into the header of their web sites. Header bidding wrappers allow publishers to conduct the real-time bidding process with multiple demand partners on multiple ad exchanges without using Google’s server. The header bidding code sends out the ad requests, and any SSPs that the publisher has defined in the header of the site can make their bids, and the ad impression goes to the highest bidder. Google is one of the bidders in the auction in a header bidding setup, but its bids are submitted with all the other bids, eliminating its advantages as a monopoly, and allowing publishers to get higher prices for their ad space.
Pre-bid header bidding enables a single unified auction where demand partners compete for ad impressions side by side rather than sequentially. This, in turn, creates greater competition among ad buyers bidding against each other to serve ads on publishers’ sites.
In addition, tag-based sales are usually conducted in bulk. Buyers can only “see” an impression when the publisher deems them eligible. By combining publisher inventory into a single server-side supply, header bidding increases the efficiency of the auction process by allowing buyers to compete for every single impression. This also enables publishers to increase bidding competition for ad requests on a per-impression basis, driving up prices in open bidding as well as increasing overall advertising revenue. It also gives publishers more transparency into how much their impressions are actually worth to demand partners.
Today, most sites have implemented header bidding and client-side header bidding integration has become an industry standard for ad inventory. Users aren’t even aware that a site is implementing header bidding in the background while they are on that site, and publishers can easily work with all the demand sources to secure the highest winning bid and maximize revenue.
Header bidding technology & how it works
Server-side header bidding or header bidding server to server
Nothing stays static, and as header bidding evolved, people began to look for ways to solve some of the problems caused by header bidding wrappers. For example, header bidding implementation can cause high latency/load time since the additional code is implemented in the header. This in turn affects the user experience and viewability, and sometimes caused advertisers and demand partners to block their ad inventory to publishers who were not performing for them. There were also issues with data security needs since pre-bidding sometimes loads tracking pixels for ads, if they don’t win the bid.
Server-side header bidding, also called server-to-server bidding, transfers the header bidding auction to external ad servers instead of conducting it on the user’s browser as occurs in traditional header bidding header bidding. Server-side header bidding reduces latency and speeds up the page load process, while still giving publishers the ability to issue ad calls and conduct open bidding with an unlimited number of demand partners, ad exchanges, and SSPs. In some ways, server side header bidding could be considered hybrid header bidding.
Benefits of header bidding
Increased revenue
The key benefits of header bidding are the breakup of the monopoly previously held by the Google Ad Exchange. Without the monopoly, multiple demand partners are now bidding against each other at the same time, even when the publisher is using Google Ad Manager, which often drives up the price offered by the highest bidder. In fact, some experts claim that the client-side header bidding process can increase rates for some publishers by up to 30%, and some have even seen gains as high as 50% in CPMs with the increased competition, allowing publishers to earn more ad revenue on their web pages.
Pass backs
Increased ad revenue isn’t the only benefit for header bidding partners like publishers. With typical tag-based programmatic buys, when an impression fails to sell or reaches the price minimum, it gets “passed back” to the publisher’s ad server to be filled elsewhere. Each time this happens, the publisher has to pay a fee to cover it. When publisher transfer to header bidding, demand is combined into a single auction, within the ad server itself, it eliminates passbacks, improving publisher margins.
What is in-app header bidding?
In-app header bidding works like other types of programmatic header bidding and is essentially a header bidding solution for mobile. Instead of working on a user’s browser, it conducts open bidding on a mobile alternative. It offers mobile publishers a way to sell their ad space and premium inventory to multiple demand partners in a real-time header bidding auction in a transparent ad marketplace.
In addition to in-app bidding, some publishers use video header bidding to sell video ad units to the highest bidder in real time, rather than relying on direct sales. Video header bidding is popular in certain industries where video content is more prominent.
Header bidding vs. waterfall
Waterfall is a term used to describe a process where one can only move to the next stage if the previous stage can’t perform.
In the context of real-time bidding, waterfall bidding works as follows. There is an ad call, and only if Google or any other platform that the publisher has defined has nothing to offer, does the ad call go to other demand partners. In most cases, if the other demand partners don’t have anything to offer, an internal ad is displayed.
When looking at header bidding vs. waterfall, it’s clear that header bidding is more democratic, with all demand partners bidding at once. When publishers transfer to header bidding, no demand partners have an unfair advantage.
How to implement header bidding
A web site looking to implement header bidding or hybrid header bidding with multiple demand partners has a simple path ahead. All they need to do to make header bidding work is to paste the JavaScript code, also known as a header bidding wrapper, in the header of the site, and they can start issuing bid requests and earning ad revenue from header bidding auctions for the ad impressions on their site. Using a header bidding wrapper, third-party demand partners like ad exchanges can submit bids before the ad server callout because the user’s browser is running the auction.
Header bidding solutions
A pre-bid client-side header bidding wrapper is free and open-source. However, over time, header bidding solution providers have built various header bidding services and platforms that make header bidding work better and enable more features like connecting to third-party services. It’s become an ecosystem.
For example, the same ad impression is often simultaneously available through multiple marketplaces, which is very likely to happen, buyers must be careful not to end up bidding against themselves for the same impression. Solutions have been created for header bidding for advertisers to prevent that from happening. Google has even created it’s own pre-bid header bidding solution within Google Ad Manager, the EDBA, to fight back now that header bidding has become the default.
In addition, the typical precautions that need to be taken against ads with malvertising and ads of low quality also need to be implemented as soon as header bidding begins to keep users and publisher sites safe.
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