Media Buying 101: What is Header Bidding & How Does It Work?

Introduction

There are many approaches for publishers to sell their traffic.

Direct orders, programmatic orders, private and open RTB auctions, and a relatively new one:

Header bidding.

What is header bidding?

How to use it?

A lot of questions!

Don’t worry!

First, I’ll explain what is Direct Buying, then I’ll go over Real-Time Bidding, and then I’ll tell you what Header Bidding is all about for you to get some knowledge!

Ready?

Time to see what header bidding is all about!

Let’s go!

Direct Buying

Direct order is simple.

This model of digital ad selling appeared before all the others.

It’s still widely used, even though it gives almost no targeting options.

Basically, it’s just selling certain banner views on a specific website.

No segmentation.

It’s just a banner on a page, which is shown to every visitor until the number of paid views is depleted.

There’s almost no logical excuse for you to buy this kind of thing.

Direct order is usually expensive and, as I’ve mentioned, provides no targeting whatsoever.

The only plausible scenario in which you could think about direct buying?

In case you have an unlimited budget and want to cover all website visitors.

Related: How to Create a Killer Media Buying Budget Strategy

Oh, well.

What about programmatic order?

It’s also directly bought traffic, but without an auction.

Even so, there’s a cool twist here.

In fact, you do have some targeting.

The banner is shown to a certain audience, picked by programmatic algorithms.

You pay a fixed price and don’t participate in any auctions, because your banner has higher priority by default.

Sometimes, programmatic order also participates in an auction.

That may happen due to header bidding, but we’ll get to this later.

Real-Time Bidding

There’s also Real-Time Bidding!

There are private and open real-time bidding auctions.

The difference?

Private auctions are held among top-tier advertisers and have priority over open auctions.

Requests are activated only in the event that they were not sold privately.

That also applies to the whole pyramid.

The first views are sold directly, then through programmatic order, and finally through auctions.

Publishers are okay with the first two, but super disappointed regarding how current RTB auctions are being held.

They think they don’t get an appropriate income and that the whole RTB system fails to be transparent.

Waterfall Bidding

RTB uses something that’s known as Waterfall Bidding.

An ad exchange sends a request to advertisers, one-by-one, until the bid goes over the bid floor.

And then bam!

It’s sold.

Probably, there are higher bidders.

However, they simply didn’t get the request or didn’t get the ability to bid.

Most publishers use Google’s Doubleclick Ad Exchange.

It’s sort of good, but it has a last bid right.

It can outbid any advertiser by a smaller bid for no logical reason.

Sounds a bit unfair, doesn’t it?

In the parallel universe, there’s only one fair SSP which always gives publishers the highest bid and is absolutely transparent.

Unfortunately, there are about 50 major SSPs and countless smaller ones.

What is Header Bidding?

While using open RTB, the publisher has to juggle SSPs, replace their codes, find the balance, and chase the highest eCPM.

Header bidding allows you to do that automatically.

The publisher can connect multiple DSPs to a single ad seat and sell impressions to the DSP which has the highest bid in that specific moment.

Why is it called Header Bidding?

Why is it also known as header auction or parallel bidding?

Because the first auction is being held not at an SSP, but at the website header.

A special code (called “ad server tag”) is placed there.

It goes off every time a new user visits the page.

The coolest feature of header bidding is pre-bidding.

Yep.

We’ve set a bid before your bid so you can prebid before you bid.

Awesome stuff, am I right?

How Does Pre-Bidding Work?

Every connected DSP and SSP makes a pre-bid, sending the bid its advertisers can provide.

Only after that does the actual auction happen at the winning-DSP and the impression is sold.

This way, the publisher actually gets the best bid from all the advertisers from every connected DSP and SSP.

And there’s no way for Google’s Ad Exchange to cheat and outbid everybody.

Google’s employees repeatedly stated that putting the auction into the header slows down the page’s loading speed.

That’s a really tough spot to get into.

Google knows that.

Google claims people will use more ad blockers to speed up a publisher’s website, leading to even more catastrophic losses of sweet cash.

The problem?

AppNexus has discovered that this isn’t entirely true.

Traditional RTB works as a waterfall.

An SSP goes from top advertisers to the lower tier, allowing you to know they can bid one-by-one.

That takes a lot of time.

Header bidding is much faster, since everybody gets the request at the same time.

The solution is also called pre-bidding.

You can compare that with signing contracts.

For example, let’s say every request is a contract.

When going through traditional RTB, you have to sign a contract with each participant and then decide who to sell the impression to.

You haven’t been able to reach some of the participants, a couple of them have quit, one of them is asleep.

It’s unproductive.

With header bidding, though?

Easy peasy!

You just shout “who wants to buy this impression?” and only after that will you actually sign the contract with the highest bidder.

Is Header Bidding a Good Thing?

Even though Header Bidding rocks, publishers will still have to use third-party pre-bidding solutions.

Why?

Because it makes no sense to develop all this from scratch.

Google, AppNexus, Platform.io and others are already providing that solution.

This means that there actually is still a layer between publisher and advertisers.

Related: Advertisers vs Publishers: Difference and Relationship Status

It’s just become much thinner and more transparent.

Getting back to ad sell approaches:

Header bidding usually has a higher priority than direct orders, programmatic buying, and RTB auctions.

This allows publishers to get a higher eCPM and advertisers to just outbid their competitors.

It seems like header bidding is a good thing for both publishers and advertisers.

Is it good for SSPs and DSPs?

There’s no way for publishers and advertisers to completely get rid of their solutions.

I guess direct sales are the solution.

Even so, it’s all extremely inefficient, it takes lots of effort, and only lowers the publisher’s income while also wasting unsold traffic.

Learn More: How to Monetize Remnant Traffic and Get Good Profit?

Index Exchange experts say publishers gain “up to a 30 percent lift in rates”, and PubMatic claims to have recorded a 50 percent growth in CPM.

There’s nothing surprising about it, since publishers get more abilities to sell their traffic.

Does this mean that advertisers also spend more?

Well…

Publishers get more, which means that advertisers will probably also spend more.

They will, if they want to.

Why?

Due to the fact that RTB will hinder the progress of some advertisers:

Those who aren’t rated top tier and who can’t buy impressions at top tier websites are gonna be screwed.

Even if they’re willing to pay two times as much as those top ones.

What about header bidding?

Header bidding sends requests to everybody simultaneously, so there’s no such problem.

This way, advertisers can pay more, but they finally get what they want and they reach a better-matching audience.

Which will eventually bring more sales and a cool profit growth.

SSPs and DSPs still get their piece.

Why?

Because they still participate in the process and provide solutions for both advertisers and publishers.

I guess this is a win-win situation.

It sure sounds like it, but header bidding is far from perfect.

Should You Go for Header Bidding?

Publishers have to choose their partners carefully.

Since the delay is now critical, impressions can be easily lost.

The whole process still depends on service providers, especially Google with its DoubleClick for Publishers, which has often been attacked by publishers.

And what about advertisers?

They’ll pay for all that.

That’s right.

All the commissions and fees of those layers between the advertisers and the publishers.

Conclusion

Header bidding is not perfect, but it’s still better than anything we’ve had before.

Nevertheless, I would never suggest you suddenly remove all waterfall-sold ads and switch to header bidding.

The best decision?

Test it on some of your inventory.

Do that for a couple of weeks.

That way, you’ll shoot some bugs and decide whether or not header bidding is good for you.

Another little tip?

It’s easier to use wrapper for header bidding, than to actually create it yourself!

Cheers!