I’ve gone over what header bidding is in an earlier post and some of the key differences versus traditional tag based setups, but I’ve always strived to technical bluntness on this site as well, hence the diagram and step-by-step path below. As a point of comparison, it could be a good idea to re-familiarize yourself with how ad serving works and the standard exchange redirect path at this time as well. Note that header bidding is also sometimes referred to as ‘advance bidding’, ‘tagless’, or ‘pre-bid’ integrations.
How Header Bidding Works:
- User requests a website
- Header tag script redirects user to one or many SSPs (or DSPs, or Exchanges)
- User calls one or many SSPs in parallel
- SSPs conduct auction with DSPs and internal network demand*
- DSPs respond with bids*
- SSP determines winning bid value and returns to User
- User passes bid value into ad request and calls Publisher Ad Server
- Ad server determines final line item to serve and redirects User to Marketer Ad Server (let’s assume the ad server determines a pre-bid SSP line item for this example)
- User calls Marketer Ad Server
- Marketer Ad Server returns final creative (via CDN)
- User calls trackback to SSP
* It’s hard to tell if everyone or no one actually runs an auction with their header tags because everything happens quite fast relative to your standard exchange process. My sense is that there is either some kind of estimation process vs. a real auction, or some fancy stuff happening with the SSP’s CDN, but without the product people or engineers from these companies actually telling me what happens it’s impossible for me to know. Here’s hoping a few visit the comments section on this article. The important point is that the SSP determines a value for the impression that the publisher can use in their ad serving decision process. How precisely that happens and if it’s better / worse than the standard auction process is an open question.
Header Bidding Explained: Publisher Perspective
For publishers, header bidding has quite a few benefits:
- Eliminate passbacks – with a header tag integration, you have a signal from the SSP in advance that they want the impression, and have transparency on how valuable that single impression is.
- Flatten your waterfall – managing the order in which partners gain access to inventory is no longer necessary because each demand partner declares how they value the impression up front
- Reduce discrepancies – discrepancies arise through latency, and multi-partner waterfalls are inherently latent
- Better yield management – tag based integrations create inefficiency because they force an average rate to compete with the impression level bids of AdX (if the publisher is on DFP). This setup leaves money on the table with both the SSP and AdX. Consider this: if the SSP is bidding anywhere between $0.50 and $5.00, but averaging $2.00, then AdX will win every impression over $2.00, even if the SSP would have paid far more, because there’s no way to know what the SSP would have paid. Similarly, any impression where AdX would pay less than $2.00 but the SSP would not fill at all, or would fill far below their average is lost revenue as well. Header bidding solves this inefficiency.
- Increase revenue – publishers make more money through all the benefits above; they save the ad serving fees paid on passbacks, they monetize the inventory lost to discrepancies, and they earn the highest rate for their inventory irrespective of demand partner.
Header Bidding Costs
As you can tell, I’m pretty positive on pre-bid, but that doesn’t mean it isn’t devoid of costs:
- Operational setup – Header tag integrations require a much, much heavier upfront lift in terms of trafficking line items. It’s not just a little more work, it’s probably 100X as much work to traffic for most publishers. The benefit is that once setup, publishers likely won’t need to touch those line items in the future like they do to manage the waterfall with a tag setup
- Longer pageload – publishers need to watch their pageload times like a hawk because it’s a well–proven fact that even fractional improvements in pageload result in better user engagement. Header tag integrations therefore require some partnership from often scarce IT resources to both implement and manage.
- Yield risk – the biggest risk I can see for publishers is that it could decrease bids from buyers. Wait, haven’t I been saying the exact opposite this whole time? That flattening the waterfall results in greater bid density and demand liquidity, leading to greater revenue and ultimate nirvana? Yes, the risk is that buyers identify which pre-bid partner allows them to buy for the lowest price and move their demand there. In other words, buyers optimize to the platforms of lowest bid density. Remember, header tag integrations don’t allow the publisher to run their own second price auction across all platforms; they just let the publisher pick the best result out of many second price auctions.
Header Bidding Myths
- Data leakage – I think data leakage is an overblown concern for virtually all publishers because if you sell a significant amount of inventory to the exchange today, you are already exposing all your users to a variety of other platforms, which can know each user was on your site. Unless you are both a highly vertical publisher where visiting your site to begin with is a valuable data signal (perhaps a site that is written exclusively for new mothers, brides to be, or those planning a vacation to a specific destination, etc), and you don’t expose much inventory to the exchange already, header bidding won’t create a new risk by itself.
- Latency – many point to latency as a key problem for header bidding, and it’s true that latency can be a problem if you don’t manage it as part of your setup. However, if you set a specific timeout limit to your header bidding tags, you can cap the amount of latency to an acceptable level. In some cases, your latency may actually improve with a header bidding solution because it may eliminate long daisy-chain setups that are highly latent today but more difficult to measure. Additionally, it’s a smart idea to load all your advertising asynchronous to your content, such that any latency on your ads don’t hold up the site content for the user. To be fair, latency can be a problem, but more on the exchange side, as many providers may not be able to respond with a valid bid unless the timeout setting sits at a certain level. My recommendation therefore would be for publishers to measure response rate at the timeout tolerance as the key metric.
Header Bidding Explained: Buyer Perspective
Header bidding is mostly a sweet deal for the publisher, but there are some benefits to advertisers as well.
- Access to inventory – tag based integrations obscure how much inventory is really out there to programmatic buyers because they can’t see what publishers are using to fill their directly sold business. Header tag integrations generate bid requests for every impression available, giving buyers a much better sense of reach for any given publisher.
- Points of access – not only do buyers see all the inventory that’s out there for a publisher with header bidding; theoretically they can access that inventory from a variety of channels. To be fair this is a risk as well as a benefit because it means the same impression is simultaneously available through multiple marketplaces. If buyers aren’t careful they could theoretically bid against themselves for the same impression.
On the con side for buyers, I don’t see many downsides outside of having to manage the risk of bidding against yourself.