What’s The Difference Between Waterfall Auctions And Header Bidding?

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When you want to display ads on a publisher’s website, you’ll generally head over to an ad exchange and place bids. The auction and bidding process plays a crucial role in determining how frequently your ads will display, on which platforms they will show up, and who your ads are going to target. With the right strategy in place, you can significantly improve your overall performance, gaining more leads and keeping costs low. When it comes to platformers, there are a couple of auction and bidding strategies that you can consider. Two common options include waterfall auctions and header bidding, which we will discuss in this post. 

What Is A Waterfall Auction

Waterfall auction is often used when there is a need to automate the bidding and ad serving processes. It’s a type of programmatic system that mostly involves the publisher in terms of programming the media sales solution. Prior to the waterfall auction system, the real-time bidding process was relatively common. Many would consider the waterfall auction an alternative to the RTB system. The waterfall auction technique is also known as the daisy chain. 

With the waterfall auction, a website owner will essentially create a list of their ad inventory and then push this through to multiple advertising networks. One thing to note here is that ad space that is available will be pushed through to the networks one by one, and in a descending order based on the importance of each. 

The program used to manage the waterfall auction system will assess the different ad networks that are available and consider their historical data. When there are no ads available at the top paying and highest performing network, the script moves on to the next network to find publishers who can fill the ad spaces on the web page. This will generally continue up until the script is able to find a buyer for any leftover open spaces. 

Problems With Waterfall Auctions

The waterfall auction technique is great, but it does come with some problems and limitations. When it comes to publishers, the major downside you may face with this technique includes passbacks. 

What happens with a waterfall auction is that the publisher’s website sends a request to an ad network to bid on a specific inventory space. If the highest-performing publisher is not responding, then the script automatically sends this request to the network that is next on the list. 

This is also where the problem comes in. Consider a scenario where an advertiser has had good results with a spot on your website in the past. They would like to make a bid again to place an ad on your website, but since they are not currently within the criteria that you have set, the script automatically goes to the next ad network to look for bids. That advertiser might have been willing to pay even more than before to get a “spot” on your website – which means you’re losing out on potential profits that you could have gained. It essentially eliminates those advertisers from the process, as manual bidding is not allowed with the waterfall auction. 

There is another potential problem that can come with the use of a waterfall auction. The passbacks that need to happen can sometimes go on for a couple of seconds before the script finds an advertiser with a bid that matches the criteria. This is especially the case when the script needs to jump between multiple advertisers to fill an ad spot. This causes latency to occur, slowing down the speed at which the web page will load. As a publisher, you already know just how important user experience is on your website – and page load time is a particularly important factor that counts toward what people think about your site. This latency can cause visitors to click away from your website and rather navigate to a competitor. 

When a suitable bid is found, it’s usually automatically accepted. This means any other ad networks in the list will be skipped – and those could also hold opportunities for you to get higher bids on your ad placements. 

What Is Header Bidding

Another common process that can be used as a bidding system for selling inventory space is known as header bidding. There is one major difference that comes into play with header bidding that can actually solve the obstacles faced with the waterfall auction. 

With waterfall auction, what happens is each advertiser is sent a request to make a bid in a descending order. It’s time-consuming and causes the web page to slow down as these requests are made. Header bidding does not rely on a one-on-one request that happens gradually but instead contacts all of the ad networks and exchanges simultaneously. 

When all of these networks are called upon at the same time, it means there is only one request made, even though multiple sources. The header bidding technology then creates a list of the highest bids that are available at each of the connected ad networks. The system then chooses the highest bid as the winner and requests the ad to be served to the webpage. 

A major benefit that comes with header bidding is the fact that it does not make you lose out on potential opportunities. This is because you are bringing every advertiser that’s looking to buy inventory space on your website together and have the ability to see what everyone can offer you. 

This is also where header bidding could make you earn more. With the waterfall auction, we mentioned that sometimes, there is an advertiser who might have been willing to give you a higher bid, but when the script moves over to the next buyer. In header bidding, there’s no need to worry about these missed opportunities. The chances that a higher bidder will come onto the table and make an offer are greater when you use a header bidding strategy. It’s also important to note that with header bidding, there are no estimates that are given when it comes to a bid being placed on your inventory space. The advertisers that send through bids here provide you with the exact amount that they are willing to pay to obtain a placement on your website. 

Downsides Of Header Bidding

As you can see, header bidding surely has its upsides, especially when compared to a waterfall auction system. It’s a great way to increase your revenue by accepting higher bids in a bigger pool, but there are also downsides that you should not overlook. 

One of the biggest challenges that you could face with header bidding is the complexity that comes with implementing this type of system. When you develop a header bidding system, it means you’ll have to create a system that is able to connect to every ad network and exchange that you want to receive bids from as soon as the server call is made. This call needs to be made on every page where you want to display ads – and it needs to effectively compare all of the bids received and then send out a request to the winner to serve the ad at the correct location on the page. 

You may need to hire a programmer to assist you with this process, which can be costly. In the long run, however, it may pay off due to the bigger selection of bids that your website has access to when loading a page. 

Latency is a common problem with waterfall auctions, but it can happen with header bidding too. This, of course, depends on the complexity of the script that you use, as well as the number of ad networks that you are making calls to. If you have a complex script and make calls to many networks, it means all of this data needs to be added to the header content of your web pages. This can also cause your website to load slowly – and even just a few seconds of delay can already have an impact on user impression. 

Apart from these factors, there is a risk of finding duplicate bids from the same advertiser when you run header bidding. Remember that some advertisers do not limit themselves to only buying inventory space from a single network or exchange. There are many of these advertisers who have an account at multiple ad networks. When they make bids on the same keywords on these networks, it’s possible that you may receive duplicate bids. This means you are causing an advertiser to bid against themselves – and it could potentially also lead to the same advertisements displaying on your website once the winning bids have been chosen. 


Waterfall bidding was a popular method of programmatic advertising in the early days of programmatic advertising. However, with the evolution of programmatic advertising and the emergence of header bidding, waterfall bidding has become less popular. With it’s numerous downsides, including suboptimal pricing for publishers and inefficient use of ad inventory, many publishers moved away from waterfall bidding.

Header bidding, on the other hand, is a more advanced and sophisticated method of programmatic advertising that allows publishers to offer their inventory to multiple demand sources simultaneously. This results in more competition for ad inventory, which can lead to higher prices and better revenue for publishers.

Overall, waterfall bidding has largely been replaced by header bidding as the preferred method of programmatic advertising.

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