What is Header Bidding and how does it work?

Reading time: 14 minutes

Technology continues to change the way we do business and go about our daily lives. Have you heard of header bidding[4]? This is a common word found in ad tech[16] and has become a game-changer for publishers because it gives them an easy way to auction their advertising space. This, in turn, has enabled them to generate better results and more yields.

In this detailed article, we will discuss what header bidding is and how it works. But first things first, let’s understand the term.

What is Header Bidding?

This is a programmatic ad buying technique through which publishers increase their ad revenue by offering their inventory[17] to bidders before requesting ad servers[5].

Another name for header bidding is advance bidding, and has gone a long way in enabling an inventory to have multiple demand sources. This results in a competitive and fair chain whereby publishers can directly conduct auctions and optimize their revenue. Besides, the method is clean and creates a better bond between publishers, ad tech companies, and revenue partners.

Inefficiencies

In this chapter, we are going to look at Google AdX Privilege and Daisy Chaining (or waterfall). Let’s get started.

Google AdX privilege

This is a Google technique through which a publisher[18] can maximize their yield[19]. Several website publishers who use Google’s ad server use a dynamic allocation[1] that enables its Google ADX or AD exchange[6] to place a bid that’s higher than any waterfall bidders who are winning. This is because AdX executes the last bid, which is intended to increase higher yields and place them in a more advantageous position.

In other words, Google waits until bids have come from other exchanges, gives them a last look, and outbids them. For instance, if Google’s exchange receives two bids, one that’s $5 and another that’s $6, it can choose to offer the $5 bid depending on the price of each bid being offered by other bid partners to win the auction.

At this point, you must see why most site publishers don’t get value for their ad space. Even more so if they use the Google ecosystem chain and bid on the waterfall. They don’t stand to gain much. The scenario leaves them in darkness because they can’t establish the value of their ad inventory[7] since their data is mostly tampered with.

Waterfall/Daisy Chaining

Are you a publisher selling ad space on your website? Do you know what happens whenever a user loads a page? When a page is loaded to your site, it requests an ad from its ad server or Google Ad manager[2]. In most cases, these ads are the directly sold ones or the ones that have been negotiated for by the sales team of the site. The ads are then shared first on the available ad space. It is important to note that all ads come under guaranteed campaigns that are programmatic.

This raises another question: What if the particular user has no direct advertiser[8] willing to serve them? In such a case, the user’s ad impression[9] will be made available in a waterfall sequence through the Google Ad manager.

Why the name waterfall? Well, because the ad space is first given to an SSP, and then ranked. However, the ranking is not based on the actual performance[10] but on historical data. In case the Ad space is not sold, it is ranked second, and the sequence continues.

This favors any buyer who has bought many Ads from you before because they remain at the top. Also, they will be the first to receive an Ad request[11] when it is available. However, the case is different if the buyer fails to buy the Ad inventory from your page. The inventory will be forwarded to other buyers until one says they are willing to buy the Ad impressions that come first.

The challenge is that whenever the impression is transferred to another buyer, its price goes down. In other cases, the request can be transferred to the highest bidder[20], thus limiting the revenue since you won’t sell your inventories at good prices.

How does it work?

Advance bidding begins to work immediately after the page starts loading on the users’ browsers. The code of the header bidding signals and executes all demand partners to simultaneously bid on this Ad impression before reaching out to the Ad servers. Some of the demand partners include APP NEXUS, PubMatic, and Rubicon. The bidding is done within a particular time scheduled by the publisher, mostly within a second.

During this specific action time, the demand partners put their auctions on hold to establish the highest bid they send. Once each partner’s highest bids have been collected, they are moved from the visitor[21]’s browser onto the publisher’s Ad server before calling its direct inventory.

Generally, header bidding consists of all demand sources participating in an auction at the same time. The publishers have control, and they determine which sources are worthy of participating in the bidding process. In addition, publishers have the freedom to increase their premium inventory prices. This has enabled some publishers to register a 70% increase in revenue. Thus, header bidding is a savior for them in their publishing endeavors.

Another factor that makes publishers have increased yields is less reliance on Single Supply Side Platform. This also increases the Ad fill rates and better allocates Ad impressions being sold to the highest bidder.

Benefits of Header Bidding

Header bidding offers a range of benefits to publishers. It allows them to remain competitive with their fellow publishers and, most importantly, enjoy more revenue. Are you still wondering what you stand to gain with this programmatic media? Here are the benefits.

Elimination of waterfall

Like we mentioned above, header bidding puts every bidder on the same level. This makes it possible for all types of advertisers to make a bid on your inventory. It is a smart way of ensuring that you won’t leave any money due to the waterfall sequence. In other words, advance bidding seals all the loopholes for losses.

Increased revenue

This is the number one benefit of header bidding. No publisher wants to count losses, and your safety is guaranteed in this media. How do you increase revenue? Just to reiterate, publisher yields increase since there is an Ad placement award for the highest bidder. This way, they are not forced to rely on the waterfall/Daisy-chaining method.

Increased competition

Since header bidding doesn’t feature any fishy pre-auction, the bidders will be willing to participate. This will translate to more bids, bidders, and competition. As a result of the high competition, your Ad impressions’ value will drastically increase.

Shorter loading times

Sometimes when the bidding time is high, the loading takes longer. However, with header bidding, the loading time is shortened. Therefore, you can employ server-side bidding to enjoy super-fast loading times. This is a sure way to offer an unmatchable user experience. However, this is a different matter entirely if you work with many partners because you must consider the timeouts.

Know your buyer in advance

Header bidding eliminates the reliance of bidders on waterfall auctions and pricing floors. This makes it possible for publishers to know the type of bid to expect and prepare for them.

More advertisers

This is another outstanding benefit of programmatic header bidding. It gives the publisher a chance to have more advertisers on board. This, on the other hand, results in increased competition for the Google advertising space. A large number of advertisers is a plus for the stability of your company and develops its adaptability with time.

Elimination of Google AdX privilege

As discussed earlier, AdX depends on dynamic allocations and mostly outbids bidders. On the contrary, header bidding presents every bidder with a chance to bid at the same time before forwarding the request to the Ad server.

Betters ads

With more advertisers who are interested in competition, your users have options to explore. They can easily go for Ads that have been tailored with their preferences and interests in mind. This gives users a better experience, unlike when dealing with impressions that do not have programmatic bidding.

All these are benefits that publishers stand to gain when they use header bidding. However, there are other benefits for buyers, including access to high-quality Ad placements, among others.

Header Bidding wrapper and adapter

The above knowledge won’t be complete if we don’t discuss the Header bidding wrapper[12] and adapter. But what exactly is this? It’s a management system that helps the publisher make Ad requests, connect to demand partners, request bids, and forward them to the ad server. The heading bidder wrapper adapter functions similarly to the Google Tag Manager.

In simpler terms, the wrappers are a channel that helps facilitate bids coming from various SPP’s then sends them to the Google Ad Manager.

Once the Ad server receives the bids, it will decide who the winner is. Generally, the main function of the wrapper is to ensure multiple demand partners are managed and each impression is given a bid. One of the reasons you should consider integrating the header bidding wrapper is that it’s not complicated. It eliminates the middleman; thus, you can connect directly with many demand partners.

What is an adapter?

Wrappers hold adapters, and they help in handling the demand from the supply side. You can’t bring together all the demand partners without the help of a header bidding wrapper and adapter; the adapter will make the SSP[3]’s demand accessible.

There are two types of adapters. The first one is the bidder’s adapter, and it helps you get bidding demand. The other one is the analytics adapter which deals with analysis. Both adapters perform differently in terms of fill rate[22], bid rate, among other functions.

How do you set it up?

The first thing to ask yourself should be what you need to set up header bidding. You’re going to need a wrapper, adapter, and SSPs/ demand partners. You will also be required to create orders and lines that correspond with your Google Ad Manager account.

You can avoid the struggle that comes with setting up header bidding by hiring a bidding provider. There are many but be careful to choose one that will do the setup, demand partnership, and everything else that needs to be done. If you aren’t sure, you can get help from prebid. It is a header bidding framework used by publishers to delegate auctions. More details about the header bidding setup are available here.

Disadvantages of Header Bidding

Header bidding can make things go wrong if inappropriately done. Here are some of its cons.

Latency

One of the disadvantages of the process is page latency. Many events occur during the auction, including securing bids, calling demand partners, and forwarding bids to the Ad server. All these events will slow the Ads or cause the page to load for a long time, thus interfering with the user experience. However, you can avoid this by keeping an eye on user metrics like frequency[23], visit depth, and engagement whenever significant changes are being made.

Management Overhead

Header bidding requires much attention even after setting it up. This is why you manage it closely to ensure that all systems are perfect. Some of the ways to manage it are by timeouts adjustments, eliminating errors, and ensuring that there is nothing that will interfere with the process.

Set up

Setting up might sound easy, but it’s not a walk in the park. The process is involved and gives you a lot to learn as well as much to miss. This is a new skill, and not many publishers have it.

Compatibility

The functionality of header bidding is dependent on its compatibility with all types of browsers. That is the only way you can be sure of its efficiency. You also need to note that browsers have different behaviors, which is why you have to be careful as you choose.

Duplication of bids

There is a risk of putting multiple impressions up for sale if a publisher employs multiple header partners. This means that the bidding process will be multiplied, which will be a drawback to both the server-side and client-side header bidding.

What is Server-Side Header Bidding?

This is a header bidding that occurs on the server-side. Whenever a page is uploaded, a server is called by the script of a header bidding. Unlike the Google Ad Manager or primary Ad server of a publisher, the server-side header bidding is responsible for securing bids, conducting header auctions, and passing them to the uploaded page. The bids are then passed onto the Ad server through the page. Once on the Ad server, the highest bidder wins, and the price is forwarded to the Google Manager. After completing the Google Ad exchange, the highest bidder is then selected by the Ad server, and the Ad is given to the users.

You might be wondering how to differentiate between the client-side header bidding and the server-side header bidding. The difference is that the browser takes care of the client-side header bidding while the server-side bidding handles the whole header bidding process.

Advantages of Server-side Header Bidding

The server-side header bidding has a lot to offer to the publisher. First, it eliminates the limitations of the older version of header bidding. Secondly, it comes in handy if you have a high number of demand sources and massive impressions. Here are the benefits of the Server-side header bidding.

Reduction of latency

The fact that servers are faster makes it possible for publishers to reduce latency in the page maximally. This is because it is done on a server but not a browser. This greatly reduces the loading time. Although the loading speed difference is not huge, it improves the user experience, making it a critical factor.

Excellent for video

The time taken by videos to load Ads on pages is longer compared to other ad formats. The user experience can be tampered with if you use the client-side to serve video Ads[24]. However, the case is different if you use the server-side because it works with videos smoothly.

No limitation for browser request

Web browsers have a limit when it comes to the number of requests generated. This means that publishers who depend on client-side header bidding can only make a few requests. On the other hand, those who use server-side header bidding are not limited since the browser does not do their bidding.

Disadvantages of Server-Side Header Bidding

The fact that server-side header bidding has some goodies to offer doesn’t mean that it doesn’t have its downside. Here are some of its disadvantages.

Difficulty in identifying users

This is the main undoing of this type of header bidding. It doesn’t feature cookie[25] matching and filters the user’s data. All these make it difficult for publishers to identify users, thus affecting their expectations.

No control or transparency

As much as the publisher has the privilege of setting an auction’s floor price, they can’t choose a buyer. This is because the server hides the whole auction process. This is different from the client-side header bidding because publishers can use the header bidding wrappers to choose the buyers.

Trust and adaptability

Since the server-side header bidding is a newly implemented method, many publishers have little information about it. This also applies to advertisers, and they might take time before they believe in it and employ it in the online advertising platforms.

What is Google’s Header Bidding?

This is a server-side technique that Google launched intending to counter header bidding. It’s also known as open bidding, but initially, it was referred to as exchange bidding. This seamless technology allows you to do header bidding from server to server through the Google Ad Manager.

The technique also makes it possible for publishers to get more ad inventory yields without jeopardizing the user experience of your application or website. Also, open bidding features unified reporting, customized tools, auction transparency[13], and simpler billing.

Why Do Publishers Still Prefer Header Bidding?

This is a common yet heavy question. Why have publishers continued to cherish header bidding even after Google got rid of waterfall inefficiency? Interestingly 70% of publishers have adopted header bidding. This was discussed above when we were giving reasons as to why the process is thriving. Nevertheless, the main reason why publishers like header bidding is because it’s a transparent and flexible process. It also reduces their reliance on Google. On the other hand, the header bidding wrapper enables the publishers to enjoy fair auctions most of the time.

Factors to Consider while implementing Header Bidding

As much as header bidding is a trending and effective ad buying method, there are certain things that you must keep in mind. This is because any incompetence might interfere with the user experience and also decrease revenue.

For publishers to enjoy all the benefits of header bidding, they must meet some qualifications. Let us look at some factors to consider.

Optimization

To remain on track in header bidding, publishers must learn how to optimize. They can’t afford to be comfortable because there are a lot of changes that take place in header bidding. Optimizations help you match your website audience to the right demand, and each site visitor is given the optimal configuration. Considering the huge number of optimizations you are supposed to make, you should use automatic techniques and machines to help you get that which you can’t get by optimizing manually.

Demand partners

The type of demand partners a publisher has determined the benefits of header bidding they will enjoy. Therefore, you must be smart by partnering with demand partners and SSPs to ensure your inventory has enough advertisers bid. However, you need to be careful about the number of demand partners you have because there will be a page latency if there are too many. After all, the browser will be stretching to receive more bids.

Viewability

This is another critical factor to consider in the header bidding process. Your Ad viewability[14] to the user is of the essence. Therefore, you must ensure your website is following the best Ad placement practices. If you have challenges doing this, you can request your header bidding partner to assist you. If an inventory is highly viewable, you can be sure to get better results in header bidding.

Page Latency

We mentioned that the browser makes the call for demand partners to make bids. Due to the high response from the partners, the page loading time will be increased due to latency. You can avoid this problem by using wrappers to set a standard time indicating how long the user has to wait before receiving bids.

Mistakes to Avoid in Header Bidding

To avoid losing money, here are a few things you watch out for:

  1. Do not collaborate with more than one header bidding partner. Here are the reasons why.
    • You might find yourself putting up the inventory for sale to one buyer for more than one time. This automatically duplicates your bid, and since DSPs will take note of the mistake, they will ignore the duplicated bid.
    • You will not get varied buyers or be better placed for competition because your Ad request might be forwarded to DSPs.
    • Splitting and allocating the Ads of a page to different providers results in doubling the loading time. Therefore, the browser will have to handle more than one auction, thus damaging the user experience.
  2. Be careful with over optimizing your ad stack. The header bidding process is not fixed, and it has a lot of changes taking place at any given moment. It needs to be managed periodically to establish the underperforming demand partners. However, you must be careful not to over-optimize.

Frequently Asked Questions

  1. Why is a waterfall not ideal? Waterfall actions often result in lower yields for the publishers. Header bidding is the preferred method. 
  2. Why should I consider header bidding? It increases access to inventory, competition, and, most importantly, revenue.
  3. What is the role of header bidding wrappers? To help integrate multiple demand sources within a web page. It also increases the speed of the site.

Conclusion

Header bidding is the preferred action type for many publishers. If you are a publisher and manage to do it right, you will increase your ad revenue and ad quality[15] tremendously. You will know your buyer in advance, and also, the loading times will be shortened. This article has highlighted everything you need to know about header bidding, and I hope it has been a helpful read.

Terms
1. dynamic allocation. Dynamic allocation allows publishers to maximize the yield on remnant inventory by giving Ad Exchange and AdSense a chance to bid on ad inventory.
2. Google Ad Exchange ( Google Ad manager ) Ad Exchange is often referred to as the premium version of AdSense, and also a Google-owned ad network of sorts. To join Ad Exchange, publishers need to meet specific requirements such as 500 000 minimum monthly traffic, be invited or join through a Google certified partner. Recently Google has rebranded this product, and it is now called Google Ad Manager.
3. Supply-Side Platform [SSP] ( SSP ) A technology platform that provides outsourced media selling and ad network management services for publishers. The business model resembles that of an ad network in that it aggregates ad inventory, however they serve publishers exclusively and do not provide services for advertisers (e.g., FreeWheel, SpotX).
4. header bidding. Header bidding is an ad technology that allows publishers to earn to most ad revenue possible for their ad inventory by ensuring the highest bidding ad is served.
5. ad servers. The computer or group of computers responsible for the actual serving of creatives to websites, or for making decisions about what ads will serve. An ad server may also track clicks on ads and other data. Major publishers, networks and advertisers sometimes have their own ad servers. Well known ad servers include Google Ad Manager, Xandr, and OpenX.

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